Don’t get too excited about the new India and Australia talks on CECA

The relationship between these two might hold the key to the current CECA talks

INTO INDIA is optimistic that some deals will emerge from the current round of talks on the Australia-India Comprehensive Economic Cooperation Agreement (CECA) – spearheaded by Australian Trade, Tourism and Investment Minister Dan Tehan and, Commerce and Industry Minister Piyush Goyal.

But a look at Australia’s stance and recent Indian trade policy actions is not reassuring.

India withdrew from the negotiations for the Regional Comprehensive Economic Partnership (RCEP); it renegotiated a number of its free trade agreements; it terminated most of its bilateral investment agreements; and it has failed to agree a mini-economic deal with the United States. Not to mention India’s stance in the World Trade Organisation which has been unchanged.

At the domestic level, India has imposed prohibitive tariffs in several sectors and introduced a range of incentives to attract reshoring and investment.

How does Australia’s record stack up? Eager to send more resources and agriculture to India, Australia has been reluctant to allow great services access and people movement from India. This is a thorny issue.

So our word is CAUTION – don’t get your hopes up too high – there has been little progress to show after ten years of negotiations.

So, why be optimistic now?

First, Australian professional trade negotiations have loosened up on what was a cornerstone article of faith for them – preferring the “single undertaking” negotiating model – in which nothing is agreed until everything is agreed. Now even they are talking about “early harvest” deals. But can they change their spots? The Morrison government, desperate for a trade win, hopes they can.

Second, India has direct concerns about China and is nervous about the US-China rivalry. It has sensibly decided to build up strategic and economic partnerships as a hedge. There is much talk in India about potentially good trade outcomes arising from China’s “trade war” on Australia.

But the stalemate is always market access.

Australia wants agriculture access – India is hesitant because this sector employs 40% of India’s population. India wants liberalisation of the services “mode 4”, specifically the short-term entry of business persons. India has argued that Australia’s short term business visitor regime constitutes a barrier to India’s services exports. Australia has pushed back on these demands, reflecting concerns at the potential impact on the labour market. In a nutshell – one big stalemate!

Overall, India is not a fan of Free Trade Agreements, seeing most of them widening its trade deficit. That is, India feels the other party benefits most. It has negotiated on five FTA’s over the last 11 years and only one has been signed.

True, India is looking eager, having revived trade talks with the European Union, United Kingdom, United States and Australia. But is it all just a lot of talk?

Remember, India is primarily after foreign investment, exports, making domestic industries competitive and incentivise other countries to manufacture in India. Can Australia play a role in any of this?

The key for Australia and India is to somehow align Australia’s export goals with India’s investment and new exports priorities.

Australia could partner India on technology, innovation and R&D.

Australian companies could boost investment into India – and there are good economic and government subsidy reasons to do so.

Australia has one big advantage here – critical minerals. India has high sustainable energy and e-mobility goals and will need these minerals.

Add to that, Australia has growing expertise in the hydrogen industry, while India has a National Hydrogen Mission. There are good R&D opportunities for both.

While India is the “pharmacy of the world”, Australia is a leader in biotech R&D. Biotech in dairy, marine and more could provide trade deal motivation.

But finally, there is the big blockage.

India wants to increase skill migration to Australia. Australia has opposed it. Most of the talks in the last decade have faltered at this point.

What has changed?

Border closures have left Australian businesses struggling to fill roles. Australia needs an ‘early harvest deal’ to attract skilled professionals from India.

So, despite the gloom of the past, there are reasons to have some optimism for these talks on CECA.

Watch this space.

Despite the huffing and puffing, China and the USA remain at the top of India’s trading partners

China trade is holding at much the same level as USA

China and the USA might fluctuate in terms of who is the biggest trading partner of India, but the one stable thing is that they both remain around the same level as India’s biggest trading partners.

If you pay attention to the posturing over border clashes with China and the “contain China” rhetoric of the QUAD, you will be surprised that very little has changed in India’s trading relationships. There might be change ahead, but it is not happening now.

In Fiscal 21, China two-way trade is at US$86 billion, USA US$80 billion, and UAE US$43 billion.

The countries that India IMPORTS vastly more than it exports are (roughly in order) China, Germany, Saudi Arabia, Australia, Japan, Kuwait, Indonesia, Iran, Switzerland and Iraq.

While the US trade does favour the US, it is the closest major trading partner to delivering anything remotely close to trade balance – India exports roughly US$38billion while it imports US$50 billion.

Smaller partners that Indian EXPORTS dominate the relationship are Bangladesh and Sri Lanka.

India now chasing trade deals – having resisted for decades

Indian PM Narendra Modi meets recently on trade with former Australian PM Tony Abbott

What has changed for India? It seems that having resisted trade deals for years, it now plans by the end of March 2022, to complete multiple quick-fire bilateral trade agreements.

Something has not changed however – the Indian government, distrustful of full scale FTA’s, is prioritizing “early harvest” pacts over comprehensive free trade agreements.

What has changed is the pandemic and the rise of China.

Therefore, the Indian government is focusing on strengthening the trade with G-7 nations with strong Indo-Pacific strategies and those with growing influence in central Asia such as the United Arab Emirates.

Australia, at a key position in the Indo-Pacific, is a high priority. As a fellow member of the QUAD, India and Australia have never been so close strategically and are keen to add trade now.

In large part, this is India’s push to do well as supply chain realignments take place – there is only a narrow window of opportunity to get these deals done.

How big is this? The government is negotiating bilateral trade agreements with 20 countries and expects to complete half a dozen deals, including those with Australia and Britain by this December and March 2022. 

India is ambitious – Mr. Piyush Goyal has set kept a target of US$ 400 billion for annual merchandise exports – almost 38% higher than US$ 290 billion achieved in last year and plans to achieve US$ 2 trillion annual merchandise exports by the end of this decade.

Outcome? Lots of deals that will not be quite world class Free Trade Agreement (FTA) but which will have some wriggle room.

New “Business Champions” group to provide much needed top level links between India and Australia

Indian Commerce Minister Mr Piyush Goyal

A new “Business Champions” group will lead top level business engagement between India and Australia – and it was launched last week in India.

INTO INDIA welcomes this move to bring the “top end” of both countries together. Business engagement at this level has not worked well in the past. Most of the business councils and chambers have provided lower level SME engagement – important as this is.

“Supply chains” is behind the enthusiasm of India for the new Australia-India Business Champions Group’s role. Mr. Piyush Goyal, Minister of Commerce & Industry, Consumer Affairs, Food & Public Distribution, Textiles, Government of India said this when addressing the Inaugural Meeting of the Australia India Business Champions.

The Minister is co-chairing the group with Australian Trade Minister, the Hon Dan Tehan.

“The Australia-India Business Champions Group’s key aim is to liberalise and deepen bilateral trade between both the nations and pave the way for collaborative economic growth.” stated Mr. Dan Tehan MP, Minister of Trade, Tourism and Investment, Government of Australia.

Major business organisations leading the group are the Confederation of Indian Industry (CII) and the Business Council of Australia (BCA). Both represent almost all the major business corporations in both countries.

Mr. Chandrajit Banerjee, Director General, CII, pointed to areas such as mining, education, defence, space and emerging sectors which the group can take forward.

Ms. Jennifer Westacott AO, CEO, BCA, highlighted that we must strengthen and reform regional and global institutions, so they deliver for our citizens.  She said the Business Champions would engage directly with the top tier of Australian and Indian Governments on matters critical to business. 

Other panelists at the meeting included H E Mr. Manpreet Vohra, High Commissioner of India to Australia, H E Mr. Barry O’ Farrell AO, High Commissioner of Australia to India, Dr. Anish Shah, MD & CEO, Mahindra & Mahindra Ltd, Ms. Julie Shuttleworth, CEO, FFI, Mr. Rakesh Bharti Mittal, Vice Chairman, Bharti Enterprises, Mr. Mike Cannon-Brookes, Co-Founder and Co-CEO, Atlassian, Mr. Nitish Jain, President, SP Jain School of Global Management, Ms. Verena Lim, Asia CEO, Macquarie Group, Mr. Girish Ramachandran, President, Tata Consultancy Services Asia Pacific, Professor Duncan Maskell, Vice Chancellor, University of Melbourne.

Adani takes giant steps towards becoming the world’s leading renewables company

Adani Group taking giant steps towards becoming the world’s largest solar power player by 2025.

Adani is taking a massive lead in India into green energy renewables.

But in Australia it is still seen as “the Indian coal company” because of its activities in Queensland – in this market the Adani reputation has taken a hit as a result.

The reality is Adani is a leader in green energy and just got a lot bigger!

Adani Green Energy Limited (AGEL), this week signed share purchase agreements for the acquisition of 100% interest in SB Energy India from SBG (80%) and Bharti Group (20%). 

SB Energy India has a total renewable portfolio of 4,954 MW spread across four states in India.

Adani is super serious about renewables – the transaction marks the largest acquisition in the renewable energy sector in India. The transaction values SB Energy India at an enterprise valuation of approximately USD 3.5 billion.

The target portfolio consists large scale utility assets with 84% solar capacity (4,180 MW), 9% wind-solar hybrid capacity (450 MW) and 7% wind capacity (324 MW).

With this acquisition, AGEL will achieve total renewable capacity of 24.3 GW (1) and operating renewable capacity of 4.9 GW.

You’ve got to hand it to Gautam Adani who has the vision to be the leader in sustainable energy transition globally and makes it one of the largest renewable energy platforms in the world.

Mr Adani created a vision in January 2020, wherein he laid out our plans to become the world’s largest solar player by 2025 and thereafter the world’s largest renewable company by 2030.

UK and India pragmatic negotiators achieve a trade and investment deal

INTO INDIA has been advocating for Australia to do what deals can be done with India, and “park” a Free Trade Agreement for later on.

The UK-India Virtual Summit has done just that.

Their newly created Enhanced Trade Partnership (bureaucratic speak for “these are the things we can agree on now) will create immediate opportunities for British businesses in India across industries including food and drink, life sciences and the service sector.

Non-tariff barriers on fruit and medical devices will be lowered, allowing British businesses to export more of their products to India and boosting UK growth and jobs. It also commits both sides to addressing immediate market access barriers as well as continuing to seek further opportunities on the road to an FTA. That is, “parking” the FTA for later on – it is just too hard to achieve.

Prime ministers Narendra Modi and Boris Johnson held their Virtual Summit this week and agreed on a “Comprehensive Strategic Partnership” – the first European country to gain this status.

Australian PM Morrison achieved a CSP with India in 2020 and set out collaboration across science and technology, maritime issues, defence and more.

CSP deals are a sign that India is become more outward looking and – like everyone else – concerned about the behaviour of China.

The trade and investment package unveiled by the British government contains over £533 million of new Indian investment into the UK, covering areas such as healthcare and technology.

British businesses have also secured new export deals with India worth more than £446 million, which is expected to create more than 400 British jobs.

I hope our Australian trade officials are going through all the detail to see if any deals Australia has with India can now be updated on a deal-by-deal basis.

Come on India and Australia – time for an FTA to be number 1 priority

It is high time the close friendship between the PM’s Modi and Morrison led to an FTA.

It is great to see so much friendship and collaboration between India and Australia – but it is time to go to another level and have a serious shot at getting a free-trade agreement between the two countries.

Here’s 3 reasons why an FTA is now urgent:

India wants greater access to Australia’s resources.

Australia wants alternatives to China for resources and wine.

India wants investment and Australia has huge funds under management.

Patience around the FTA has been a good approach but now we have to step up the pace and get on with it.

We need some form of harvest agreements to take the heat out of agriculture – which is always a super-hot political topic in India.

Also, India seriously wants investment flows and Australia has not been forthcoming. Time for the Australian Government to lead our huge investment funds into India.

The reality is – close relations in trade mostly follow investment, and Australia has not invested heavily in India.

Wine barriers to India are huge – there is a 150% tariff – and yet wines like Orlando Jacob’s Creek have done well there.

One problem for India is they are encouraging their own wine industry, typically at the low end of the market. Perhaps they can free up tariffs on high end wine imports?

The relationship between Prime Ministers Modi and Morrison is close and could be a building block for an FTA.

Let’s put it top of the agenda!

Adani group transforms from coal empire to infrastructure, renewables and data

Gautam Adani is transforming his business

After spending two decades building a business empire centred on coal, Indian billionaire Gautam Adani is now looking at a different future. His ambitious plans are getting a boost from close friend Indian Prime Minister Narendra Modi.

Mr Adani is diversifying into airports, data centres and defence – sectors Mr Modi considers crucial to meeting India’s economic goals. Investors are rewarding the pivot.

In less than two years, Mr Adani has gained control of seven airports and almost a quarter of India’s air traffic.

Adani will boost his renewable energy capacity almost eightfold by 2025.

Last week, he won a contract to co-develop a port terminal in Sri Lanka, a neighbour India is courting to check China’s influence in the region.

Adani Enterprises last month signed a deal with Edge- ConneX to develop and operate data centres across India.

After starting out as a commodities trader in the late 1980s, Mr Adani is now India’s second-wealthiest person, with a net worth of US$56 billion. He has added US$50 billion to his fortune in the past year, about US$5 billion more than Mr Ambani, Asia’s richest man, according to the Bloomberg Billionaires Index.

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.