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.

India’s Economy “Picking up Steam” Says S&P

Australian exporters – take another look at India

S&P Global Ratings said that after stalling post the second wave of the Covid pandemic, India retained the country’s BBB-sovereign rating with a stable outlook.

INTO INDIA has urged Australian firms looking for new markets to take another close look at opportunities in India.

S&P said that growth will improve over the July-September quarter, pointing to high-frequency indicators such as goods and services tax receipts and motor vehicle sales. Record forex reserves, and India emerging as an external creditor to the world has also supported the rating and stable outlook, S&P said.

Data released in July showed India’s economy expanded 20.1% year-on-year in the April-June quarter on a low base though sequentially it was down 16.9% over the previous quarter. 

S&P anticipates another Covid wave in India, but with rising vaccination coverage, it expects this to be less severe both in terms of health and economic impact. India’s vaccinations have crossed 700 million and in the first week of September, the daily average has been over 7.6 million doses.

Source THE INDIA EXPERT blog of Gunjan Bagla

CONCLUSION – INTO INDIA asks exporters and investors – if you are not now heavily committed to India, now is the time to take action.

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.

Deloitte finds US firms investing more in India than in China

INTO INDIA has long called for more western investment into the growth story that is modern India.

Now, according to a survey conducted by multinational professional services network, Deloitte, a large proportion of international business leaders remain confident in India’s short- and long-term prospects and are readying plans to make additional and first-time investments in the country.

The India FDI Opportunity survey of September 2021, which questioned 1,200 business leaders of multinational corporations in the U.S., U.K., Japan, and Singapore, found that India remains an attractive destination for investments, scoring highly for its skilled workforce and prospects for economic growth.

  • 44 percent of the 1,200 business leaders surveyed are planning additional or first-time investments in India
  • Nearly two-thirds of first-time investments will be made within the next two years
  • Business perceptions of India are better in the U.S. and UK compared to Singapore and Japan
  • Recent reforms by the Indian government to improve ease of doing business are popular, but awareness of policy improvements remains low

It also said that more business leaders, especially in Japan, are making investments in India for access to the domestic market rather than using India as a springboard for exports.

“India has the strongest positive perception in the U.S. when compared to markets such as China, Brazil, Mexico, and Vietnam. The U.S. and U.K. business leaders expressed greater confidence in India’s stability,” it said.

Investment is always indirectly but powerfully linked with market entry and trade outcomes. INTO INDIA applauds the enthusiasm of the US for India and hope this is also taken up in Australia – where investment funds are high – fourth largest wealth management market in the world.

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.

Australia: home to 48 of the world’s top 50 most innovative companies

Bosch and Monash University team up on “smart agriculture”

When you think Australia you might call to mind minerals, vast fields of agriculture or cricket.

But there is another reality about Australia – it’s a smart place.

International companies are leveraging Australia’s talent, government support and research to boost productivity, competitiveness and growth – according to data from Austrade and Boston Consulting Group.

Forty-eight out of Boston Consulting Group’s top 50 most innovative companies operate in Australia. These companies have partnered with Australian organisations to research additive manufacturing, renewable hydrogen technology and cloud supercomputing, among other areas.

Advanced manufacturing: General Electric

GE subsidiary GE Additive and the University of Sydney are establishing a high-tech manufacturing hub. The Sydney Manufacturing Hub will advance Australia’s capability in metal additive manufacturing technology.

Agricultural technology: Bosch

Bosch Australia and Monash University are co-developing Australia’s first smart agriculture research facility. The facility will contain a prototypical ‘smart farm’ to test: artificial intelligence; automation; robotic and advanced sensor technology solutions

Energy: Hyundai

Hyundai, Fortescue and CSIRO are working together to develop renewable hydrogen technology. The group seeks to:

  • develop new hydrogen technologies with the potential for bulk transport
  • build a renewable hydrogen refuelling facility, to deploy hydrogen fuel cell coaches
  • build the first combined hydrogen production and refuelling facility in Western Australia. 

Healthcare: Johnson & Johnson

The Johnson & Johnson Innovation Partnering Office @ Monash is a hub for researchers and early-stage companies. The facility allows them to develop novel pharmaceutical, medical devices, and consumer healthcare solutions.

Technology: Amazon Web Services and Intel

Amazon Web Services, Intel and AARNET established Australia’s first cloud supercomputing facility. Based at RMIT University, the facility focuses on advanced data processing and computing.

So, from the land of minerals, farming and cricket – there is also an advanced technology reason to team up with the Aussies.

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 could be world’s third largest economy as soon as 2030

Two facts demonstrate India’s amazing economic growth:

First, today India is the world’s 6th largest economy.

Second, as soon as 2030, it is likely to be the 3rd largest.

Mugunthan Siva, CEO of India Avenue Investment Management (Sydney and Mumbai) makes a compelling case for India focused, actively managed high conviction funds and the investment themes he likes include technology, manufacturing, construction, rural, real estate, B2B and market share leaders.

You can read more here:

https://www.livewiremarkets.com/wires/why-india-could-be-third-placed-by-2030

India Avenue website: