India a prime target for Aussie exports and investment – Austrade

Austrade’s Ashley Brosnan puts the case for Australian businesses to quickly get into India:

Australian businesses continue to see opportunities across a range of sectors including education, mining and resources, infrastructure, agri-food, and digital services. Thanks to the steady success of some great Australian brands, Australia is already a trusted supplier and investor.

However, India remains a challenging place do business. Expansion requires a high degree of market literacy and on-the-ground experience. Local partners help exporters and investors to navigate markets and regulation – and these partners can prove invaluable.

Despite this, the Government of India has signalled that India is ‘open for business’. It is emphasising investment and competitiveness as factors that will support the economy and encourage a return to growth.

The effects can be observed already in global rankings. India has moved up 63 places in the World Bank ‘ease of doing business’ rankings in recent years.

Austrade is helping Australian companies to explore India

The Australian Government is investing heavily in developing commercial links between Australia and India. The Australia-India Comprehensive Strategic Partnership agreed by Prime Ministers in June 2020 creates further opportunities for Australian business.

The Partnership seeks to build supply chain resilience between the two countries. It strengthens and diversifies trade and investment links with a focus on education, critical minerals and technology cooperation.

Today, Austrade posts across India are working intensively with Australian businesses to understand market, identify opportunities, make connections and help companies negotiate contracts.

India consumer spending skyrockets

India’s consumer spending a “revolution”

Austrade’s Ashley Brosnan on India’s consumer spending “revolution”:

The biggest revolution taking place is the rapid rise of a huge, diverse and wealthy consumer market. Despite the impacts of the pandemic, domestic demand is likely to be a major driver of recovery and growth over the next decade, making up 60% of the overall economy.

E-commerce is taking off as smartphone usage multiplies. India already has over 1 billion internet users and the digital economy’s contribution to GDP is projected to grow 15–20% by 2024.

Incomes are also rising strongly. India’s median income per household is expected to reach A$13,867 by 2025. The World Economic Forum considers that consumer expenditure in India will grow by a factor of four up to 2030.

This means over 80% of Indian households will be middle-income in 2030 – an increase of 140 million. Another 20 million will be considered high income.

India’s emerging and aspirational middle class is seeking premium food and beverage, healthy lifestyle products, technical infrastructure, quality healthcare and education, entertainment and consumer goods.

Trends in consumer demand are encouraged by a substantial, highly-skilled Indian diaspora in Australia, which is set to number 1.4 million in 2031.

India great agritech market but an insider advises “find local partners”

Agritech booming in India but be careful about market entry

A recent story in EVOKE, an agritech site, really caught my eye with a piece of sound advice.

It was so good to read the Managing Partner of Omnivore, Mark Kahn, with his greatest piece of advice to those not already there: do not to move to India immediately. Omnivore is the largest and oldest player in the Indian agritech venture scene

“I’ve never seen a foreign startup succeed in India that was selling directly. Sometimes we have very well-meaning people that relocate their lives here and think they’re going to be able to build an organisation from the ground up and the reality is it’s just very difficult.

“The best thing you could do is get some Indian members on your team, co-create solutions that bridge the gap between whatever you’ve developed earlier and whatever our local farmers actually need and find local partners.

“You should be manufacturing in Australia or maybe India, but you don’t want to build a distribution system yourself and even if you try, you’re not very likely to succeed.”

He pointed to agritech related to water and drought resistance as two high priority opportunity areas.

The agritech opportunities are huge, but INTO INDIA has been advising for a long time that you need partners and a collaborative mindset to really succeed in India.

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!

IMF Projects India’s Growth Rate to Jump to Impressive 12.5 Per Cent in 2021

My good friend Mugunthan Siva is the CEO of India Avenue Investment Management – an India and Australia investment company – and he has advised me of great news for the Indian economy and investors.

The International Monetary Fund is now forecasting India to grow GDP at 12.5% in 2021 – the only double digit forecast amongst developed and emerging economies.

Expected global growth of 6% will also play a role in India’s growth given its incrementally increasing role in supply chains, the rise again of the IT outsourcing industry and its strength in pharmaceutical manufacture and export.

In 2022 the IMF forecasts a further 6.9% GDP growth for India – once again the leader of the pack. If India continues to grow like this the US$5tn goal of the Modi’s Government appears within reach in the next 4-5 years.

According to Mugunthan, India’s equity market is evolving nicely given the pivot post COVID. Market breadth has normalised and active managers are dominating the landscape again, as they should in an inefficient equity market like India’s. The next 3 years should see a strong recovery in corporate profit.

Will your “reset” include new approaches to India?

Australia and India have never been closer. The last year has seen major advances in strategic and defence engagement and cooperation.

Now, as business and organisations reset, does India play a role in your future plans?

Growth in India is outstanding and assured – largely because of a young population boosting domestic demand.

It is a complex and very different market, but one which rewards the right entry strategy and long term engagement plans.

Time for India to be part of your reset?

India releases its first ever “Australia Economic Strategy” as the two countries move closer

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.

India and Australia could lead a prosperous and peaceful Indian Ocean Region

The AES is India’s response to Australia’s An India Economic Strategy to 2035 (IES), launched two years ago.

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.

Conclusion

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.

6 steps to bring India and Australia closer in 2021

6 steps to strong India-Australia ties in 2021

  1. 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.
  2. PM Modi is a politician who likes to think outside the square, so innovative ideas from Australia will be welcome in Delhi.
  3. 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.
  4. 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.
  5. 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!
  6. 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.

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.