Despite a tariff as high as 150% plus state taxes, Australia’s Jacob’s Creek is a standout leader in the imported wine market of India. This Aussie winemaker is owned by global giant Pernod Ricard.
Here are some stunning statistics – imported wine accounts for 40% of wines sales in India. 70% of that 40% is Jacob’s Creek. This means Jacob’s Creek accounts for over 20% of the wine market in India.
Another stat – every year 19 million Indians reach legal drinking age.
Wine is mainly an urban success story in India, with three cities dominating the consumption – Mumbai, Delhi and Bengaluru. Apparently women are driving demand for wine – while men stick to whiskey and beer, women have become major consumers of red wine.
Jacob’s Creek has succeeded despite stiff competition from local winemakers, including Sula and Fratelli.
In the context of exporters urgently seeking alternatives to China, Jacob’s Creek is a success story that should be studied by those seeking to succeed in India.
Now – about those tariffs. Australia needs a coordinated campaign to get some relief for wine. This campaign needs to encompass governments, industry and culture/education. My advice – don’t go head-on against the tariff. Subtle approaches are best. Work out what we can offer India and how some reduction in tariff therefore becomes mutually beneficial.
Commenting on the recent Indian Budget, Vishal Kampani, Managing Director, JM Financial Group, said “the Finance Minister has laid the foundation for next-generation growth and deserves a big round of applause.”
The Union Budget 2021-22 presented by Finance Minister Nirmala Sitharaman on Monday has laid out the road map for India to achieve sustainable growth in the years to come by delivering on key expectations. By choosing growth imperatives over fiscal puritanism, the FM has clearly indicated where the government’s focus and priorities rightly lie.
Yesterday was both Indian Republic Day and Australia Day – and in these times the closeness of the two countries makes us more aware of what we have in common.
Australia’s Prime Minister Morrison wrote yesterday that: “While, for now, our people are separated, the truth is that Australia and India are closer than we have ever been. Our progress is unchecked. We’ve taken huge strides in the last year, and, despite its enormous hardship and loss, 2020 will be remembered as a pivotal moment in our friendship.”
Business and investment can become the next step in the “huge strides” in the friendship of the two great democracies.
India’s growth and demand right now means that every sector of Australian business should have an “India strategy” and become part of this amazing growth story – and the future closeness of the two countries.
The launch by India on 18 December of its Australia Economic Strategy (AES) – the first of its kind for India – could be an exciting step along the way to increased trade. As KPMG has expressed it: “It demonstrates India’s intent to fast-track the relationship with Australia in a post-pandemic world.” Exciting.
My view is that as Australia and India move closer together, opportunities will emerge for the two to create and lead an “Indian Ocean Countries Group” – a pathway to peace and prosperity in our region.
The AES adds to the Comprehensive Strategic Partnership (CSP) announced by Prime Ministers Morrison and Modi in June 2020 – and both are real evidence that India and Australia are moving closer together.
Three pillars of India’s strategy
The AES is based on three pillars: resources; technology & services; and research & innovations.
Five key sectors
According to KPMG there are five key sectors:
The first is Indian investment in Australia’s mining and resources sector, especially lithium, cobalt and nickel, important for a rapidly growing e-vehicle market.
Second is Indian investment in renewable energy both in the establishment & operation of solar farms as well as the supply of EPC services with Sterling Wilson Solar Limited being a case in point.
Third is health and pharmaceuticals. Collaboration in clinical trials, cancer research, medical & health-tech and training, knowledge transfer and sharing of Australian best practices in hospital administration and patient care.
Fourth is investment in Australia’s agribusiness sector including farmlands and Australian food processing capabilities. There is also significant potential for knowledge sharing and collaboration in best practices for dairy processing.
The fifth is software & information technology. India’s tech giants already have sizeable operations in Australia with further organic and inorganic growth on the cards and an opportunity to extend their business portfolio into government accounts. Further, as Australia looks to build up internal capability and capacity, there is opportunity for the tech giants to set-up centres of excellence or innovation hubs in strategically important areas such as cyber security, cloud and digital, for Australia and the wider ASPAC region.
Make in India program
The new AES, and IES and the wider strategic partnership, all serve to complement India’s flagship Make in India program, which makes India a credible alternative for lower cost manufacturing for Australian companies as they look to diversify business and supply chain risk in a post pandemic world.
Close relations have historically been built on a combination of defence/strategic alliances, mutual investment and trade.
For Australia and India, the future is looking bright in all three areas.
Australian Prime Minister Scott Morrison and Indian Prime Minister Narendra Modi get on well – they can turn that into specific outcomes by continuing the close dialogue.
PM Modi is a politician who likes to think outside the square, so innovative ideas from Australia will be welcome in Delhi.
Two-way trade is at around A$30 billion and can grow – aiming for slow and steady rather than dramatic boosts will work well for both sides.
Food security and food quality provide collaboration opportunities for both countries. India offers the advantage of diversifying Australian global agricultural exports away from wheat and beef and towards vegetables and fruit.
More interaction at all levels of politics (State and Federal, Ministers and Members) will help because India is a complicated political puzzle with Modi pushing more decision making down to state level and competition between states is increasing – and there are 29 of those!
Creatively looking for ways to collaborate will work well and move our trade from “transactional” to “relationship”.
With these steps we will see strong India-Australia ties in 2021.
India is missing from the world’s biggest trade bloc which has just been formed – 15 countries representing 2.2 billion people have signed on to a Regional Comprehensive Economic Partnership (RCEP). Talks on RCEP began in 2012 and it has now created a bloc which accounts for about one third of the world economy.
This is a massive new initiative for global trade.
India and the USA have missed out – India because of concerns for farmers produce, and the USA because President Trump pulled the pin on the concept.
India is the mystery case in the region because opting out of RCEP is not going to help its economy. Concerns over lower tariffs hurting local producers won the day and India moved out of the deal.
Did India also withdraw because the relations between India and China are sour, with border disputes and other issues on the rise?
But India could ultimately join RCEP – the doors for India to join the bloc will remain open in future, according to the participant countries.
Otherwise, India looks like being one of the two big losers in this move.
The RCEP group is composed of the 10 Southeast Asian (ASEAN) countries along with China, South Korea, Japan, New Zealand and Australia.
Vietnam “hosted” the final deal online and said the deal will help to lower trade tariffs between the participant countries, over time, and is less comprehensive than the Trans-Pacific Partnership (TPP).
“RCEP will soon be ratified by signatory countries and take effect, contributing to the post-COVID pandemic economic recovery,” said Nguyen Xuan Phuc, prime minister of Vietnam.
The actual legacy of President Donald Trump’s “America First” withdrawal from multilateralism and deals like TPP and RCEP could be a declining US role in world trade.
In contrast, China could be the big winner – experts say that this pact is a testament of China’s strong influence in the region.
The RCEP will lower or eliminate tariffs on various goods and services, although the scope of the agreement—essentially an extension of free trade under existing frameworks—is limited.
So, what is the biggest benefit of RCEP? The pact will create so-called rules of origin, which make it easier for companies to set up supply chains spanning multiple countries.
This is super important – it will be much easier to manufacture and sell goods in the region once RCEP comes into force.
A great source of information about Asia is ASIALINK here in Australia – and for those interested in India their INDIA STARTER PACK is valuable.
Australia’s economic relationship with India has expanded significantly in recent years – particularly exports of minerals and energy, as well as our provision of education services to tens of thousands of Indian students.
We now have the basis to do more. It will take some marketing creativity and a realisation that brand “Australia” goes down well in India.
Two-way goods and services trade between Australia and India totalled AUD 27.4 billion in 2017. Major Australian exports to India included coal (AUD 9.2 billion), education-related travel (AUD 3.4 billion) and vegetables (AUD 1.38 billion). Our main imports from India were refined petroleum (AUD 1.6 billion), medicines (AUD 335 million), pearls and gems (AUD 274 million) railway vehicles (AUD 199 million).
The total value of Australian goods exports to India for 2017 was AUD 15.7 billion, making it our fifth-largest goods export market. We exported an additional AUD 4.4 billion in services to India, a figure primarily made up of education-related travel services and other personal travel.
Time to review your India market entry strategy? Let’s talk.
There is a covert diplomatic trade war between Australia and China, and it is showing the world how China responds when it takes offence or simply does not like your diplomatic stance.
First, responses from China are random and arbitrary – making it hard to respond.
Second, communication about trade bans is always informal and difficult to clarify.
Third, unexplained checks on products slow trade down or lead to damaged goods.
Examples of this use of checks to pursue trade reprisals include looking for weeds in barley, questionable metallic levels in lobsters, or bugs in timber. An aligned strategy includes the Chinese allegations of Australian producers dumping wine, tariff threats on cotton and talk of curbs on Australian copper and coal.
Iron ore – Australia’s major export – is so far not involved.
For Australia, exports to China dominate the economy. Consider these figures of “the top 5” where Australia exports:
China A$150 billion
Japan $52 billion
South Korea $25 Billion
USA $17 billion
UK $15 billion
The world is watching this trade dispute – and learning how China goes about it.
Not many in the west think of India as a food exporter. But it is – and the numbers are going up.
This blog Into India has called for greater collaboration between India and Australia to become the “food bowls of the Indian Ocean Region”. The combination of the know-how in both countries could produce major agribusiness innovations, especially in horticulture and hydroponics.
Indian exports of essential agricultural commodities for the cumulative period of April-September, 2020 has increased by 43.4% to US$ 7.34 billion.
The major commodity groups doing well in export include Groundnut (35%), Refined Sugar (104%), wheat (206%), Basmati Rice (13%) and Non-Basmati Rice (105%).
It’s a great outcome for the Modi Government.
To boost agri exports, the Government created an Agriculture Export Policy, 2018 which, among other things, provides for a cluster-based approach for export-centric farming of cash crops like fruits, vegetables, spices, etc. It is working!
Recently, the Government has also announced an Agri Infra Fund of US$ 13.70 billion to improve the agri business environment – so more export growth is on the way.