How did India miss out on being part of the world’s biggest trading bloc?

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.

India and Australia have a trade relationship that can grow

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.

Australia shows what happens when you get the Chinese offside

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.

Indian PM Modi and Australian PM Morrison could create “Indian Ocean Food Bowl” – India exports up

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.

E-commerce and wellness trends spark new opportunities in South Asia, says Austrade

The health & wellness trend

Since the onset of the coronavirus pandemic, consumers in South Asia have focused on boosting their health and immunity. This is a sector where Australian companies have already made commercial inroads — and more opportunities will arise. Australia’s iconic wellness brand, Swisse, reacted quickly and is now selling across 10 major e-commerce platforms in India.

Indian consumers are highly receptive to Australian wellness products. Consumers appreciate our clean, green and reliable manufacturing standards, and these high standards confer an automatic brand premium on Australian wellness products.

Similarly, there is increased demand across South Asia for products that are perceived to boost people’s immune system. In India and Bangladesh this applies to fresh produce, and in particular to Manuka honey. The demand for Australian citrus in Bangladesh has remained high this year, even during the local harvest season.

E-commerce: the next big shift

The rapid growth of e-commerce in the health and wellness sector is accelerating opportunities for Australian companies and South Asia is uniquely poised for a boom. With a combined 670 million internet users – and over 130 million online shoppers – the region is the second largest mass market for Australian companies, second only to China.

Growth in regional e-commerce is rapid. Online retail clocked A$75 billion in sales across South Asia in 2018–19. With year-on-year growth of over 40 per centthe region’s internet economy is forecast to be worth more than A$200 billion within the next five years.

Based on market observations by Austrade in South Asia, we forecast that the market for Australian e-commerce products will grow exponentially in the coming years. This applies especially to health, beauty, nutraceuticals and processed-food products.

The impact on Australian exporters

These two consumer trends – a growing appetite for wellness goods and enthusiasm for e-commerce – create good scope for Australian companies wanting to diversify their export markets to the South Asia region. Australian companies with a brand narrative that speaks to health and immunity will likely find ready markets among consumers.

Thanks to Austrade for the above analysis

India trade policies and “self reliance” focus could be bad news for Australia

As China continues a trade war with Australia, news from India would be a concern to those who see India as an alternative market to China.

In his India Independence Day speech, Prime Minister Narendra Modi launched “Atma Nirbhar Bharat Abhiyan” (Indian self-reliance). This would have set the alarm bells ringing in Austrade and the Government.

It sounds like protectionism, looks like protectionism and seems impossible to achieve without protectionism – but everyone in India is busy telling us it is not protectionism.

Even so, the speech by PM Modi gave a call for reducing imports and pushing exports of finished products in place of raw material, saying the country will have to move forward with the mantra of ‘Make in India’ as well as ‘Make for World’.

External Affairs Minister (EAM) S Jaishankar later clarified, saying that Atma Nirbhar Bharat merges domestic production and consumption with global supply chains. He added that it’s not about being self-contained or being closed to the world rather being self-sustaining and self-generating.

China has imposed an 80 percent tariff on barley imports from Australia in retaliation for Canberra’s demand for an independent investigation into the origins of the COVID-19 pandemic. This will cost Australian farmers AU$500 million annually. It has also hit imports of Australian wines.

Can Australia turn to India as an alternative? For wines, probably not – Australia is seen as a source of non-premium cheap wines in India so our premium sales to China would not appeal there – at least not without a lot of marketing.

Here’s what I think Atma Nirbhar Bharat means India will do:

  1. Reduce its over-dependence on other countries for trade by focusing on inward manufacturing.
  2. Promote Indian products, brands and services by becoming “VOCAL FOR LOCAL”; and
  3. Continue to trade with other countries but aim to eliminate trade imbalances and, where possible, adopt a mercantilist approach to international trade.

So, Australia and other potential trading partners with India will have to make up their own minds. For for now, Atma Nirbhar Bharat does not look like good news for them.

India and Australia are perfectly placed to become closer allies in the post-Covid19 world

The relationship between India should flourish in strategic and defence areas plus trade and investment.

Both Australia and India are significant powers in the Indian Ocean region.

India, the world’s largest democracy, is a major power.

The trade relationship

India was Australia’s eighth-largest trading partner and fifth-largest export market in 2018-19, driven by coal and international education. Two-way goods and services trade with India was $30.3 billion in 2018-19, and the level of two-way investment was $30.7 billion in 2018.

Strategic relations much closer now

Australian Prime Minister Scott Morrison has worked hard on the India relationship and his personal connection with Indian PM Narendra Modi.

On 4 June 2020, Prime Minister Scott Morrison and Prime Minister of India, Narendra Modi, participated in the Australia-India Leaders’ Virtual Summit. At this meeting, the two Prime Ministers elevated the bilateral Strategic Partnership concluded in 2009 to a Comprehensive Strategic Partnership (CSP).

The CSP is based on mutual understanding, trust, common interests and the shared values of democracy and rule of law. Through the CSP, both countries have committed to work together across a range of areas.

The CSP also marks a step forward in the two countries’ ambitious agenda to expand our trade and economic relationship, as outlined in the India Economic Strategy (IES), which was released in July 2018 and endorsed by the Australian Government in November 2018.

India’s growing economy and young population need Australian goods and services

Over the next 20 years, a growing India will need many of Australia’s goods and services, including agriculture, education and skills training, and healthcare. There will of course be growth across most areas – but these are the standouts.

Since 2000, India’s GDP has grown seven-fold to reach USD3 trillion. India’s economy is forecast to become the third largest by 2030 (currently seventh) in market exchange rate terms. India already has the third largest economy in PPP terms and is set to maintain this ranking. The two-way stock of investment was valued at AUD30.7 billion in 2018. In 2018, Australia’s investment in India was valued at AUD15.6 billion and India’s investment in Australia was valued at AUD15.1 billion. India was Australia’s 18th largest investment destination.

The Aussie “India Economic Strategy”

Australia’s economic engagement with India is underpinned by the India Economic Strategy (IES), which was commissioned by the Australian Government in 2017 and led by Mr Peter Varghese, former Secretary of the Department of Foreign Affairs and Trade (2012-2016) and High Commissioner to India (2009-2012). This document is the guide for future growth.

Education is huge but facing challenges

Education is Australia’s largest service export to India, valued at AUD5.5 billion and accounting for around 85 per cent of the total. Indian students in Australia number almost 110, 000 (year to date September 2019), which marks a 33 per cent increase over the previous year. These students made 132,079 enrolments in Australia, comprising 15 per cent of international enrolments. As an education export market, India is second only to China, with exports valued at AUD12.1 billion in 2018-19 and 246,454 enrolments in Australia. Adapting to post-Covid19 education market changes will be a challenge for Australian universities.

Austrade is showing and creating the way

The Australia-India Business Exchange (AIB-X) is a new, Austrade-led, Australia-India business marketing platform that will build on the success of Australian Business Week in India, last held in 2017. This multi-month campaign included a coordinated program of activities and events. Minister Birmingham led a business mission to India in late February as part of AIB-X, with sectoral events and workshops to be held in five cities.

This will provide an opportunity to deepen trade and investment ties, focusing on small and medium across the IES’ priority sectors. Further information can be found on the Austrade website.

Plus Austrade has set up The Australian Store at Amazon India – primed to take off over the next few years.

amazon2

People-to-people links

Australia and India are building strong and lasting ties through our people-to-people links.

The Indian diaspora (comprising both Australians of Indian origin and Indians resident in Australia) is now Australia’s fastest growing large diaspora. According to the most recent (2016) Census, the number of people born in India amounts to 592,000, representing 2.4 per cent of the Australian population, or 1 in 50 people. Around 700,000 people claim Indian ancestry.

India remains Australia’s largest source of skilled migrants and the second largest source of international students. Hinduism is our fastest growing religion and Punjabi is our fastest growing language.

The Australia India Council

The Australia-India Council is also advancing Australia’s foreign and trade policy interests with India. Each year it provides grants for programs linking the two countries. I was fortunate to support the Genesis Horticulture Services research mission to India in November – part funded by AIC.

(Thanks to DFAT for lots of the above information)

world3

 

 

 

India attracting investment during the pandemic and USA is the largest trading partner for a second year

Since March, India has received over $20 billion of new investment from Western companies despite the pandemic.

Thanks to John Bell, Client Relations, Amritt, Inc, Malibu California for this information.

Here are  four examples of significant improvement in bilateral trade between the two countries (India and USA) during the pandemic:

Dozens of large and small organizations depend on Amritt as their trusted advisor to succeed in India, whether selling, sourcing or leveraging talent.

You can Email John Bell at johnb@amritt.com

 

How India is different from China – insights from Asialink Business

Asialink Business has a wonderful Asian Market Update Series and a recent one focused on India.

One of the speakers was Mary Manning – Portfolio Manager at Ellerston Capital.

Dr Manning manages the Ellerston India Fund among other Asian investments.

She detailed why India is unique and not the next China. For example, the structures of the two economies are very different and beyond coal, exporting bulk commodities is not going to be the bedrock of Australia’s relationship with India.

India is also at a very different stage of economic development to China, with different consumer preferences, price points and distribution channels. These factors give rise to a completely different set of sectoral opportunities, that will most likely require capital investment on the ground – but one size does not fit all when it comes allocating capital in India.

podcast

Dr Manning cited several examples of successful investment in India by multi-national corporations that cut across geographies, sectors, time frames and business models, such as majority stakes in listed companies, through to unlisted joint ventures and distribution agreements. These companies include household names in Unilever, Suzuki, Prudential, Macquarie, Facebook, Alibaba, McDonalds, Walmart, and QBE.

Dr Manning said the higher returns on equity that could be achieved in India were a major reason why Australian companies should be considering investment opportunities there.

She said there was currently an investor scramble for ‘new economy’ assets in India in key areas such as healthcare and infrastructure and while good buying opportunities could present over the next six to 12 months for equity investors – with the Indian economy weakened by COVID-19 – a long-term view was needed.

India_At_a_Glance_Country_Starter_Pack

7 ways to succeed in wonderful India

This short list can be your guide to success in wonderful India:

  1. Bring a culturally aware and adaptable mind to India – you will need both. By “culturally aware” I mean more than how to greet and exchange cards. Cultural awareness is understanding how the other thinks and requires some study and effort.
  2. Develop some flexible plans for India – they will need to change!
  3. Commit to India for the long term. One or two years is not enough. I have been going to India since around 2005 and still learning new things and making new connections – to find a way through the maze that is India.
  4. Make social media a part of your program to build your brand and product awareness in India – the shift to social media/digital marketing there is huge.IndiaDigitalEco
  5. Adapt planning and approaches for the need of your business and sector. You might need a quick market study – or you might need studies over several years. Each is different.
  6. Learn as much as you can about your potential market – connect with your potential customers and see how they operate and what is happening in their sector.
  7. Let the market build a relationship with you and learn about your business. Again, like all the other points, this takes time.

CONCLUSION

It is going to take time to succeed in India. But for one of the biggest most dynamic markets with the youngest population on the planet, investing your time will pay off.

Why get closer to India? About 600 million people, more than half India’s population, are under 25 years old; no country has more young people. Remember the economic impact of the western “baby boom”? It is time the west moved closer to India in trade, culture and tourism. What do you think? As the great Indian philosopher Rabindranath Tagore said: “You can’t cross the sea merely by standing and staring at the water.”

kirana