Preparing for the new era of India trade in 2023

By Harish Rao, Executive Director, Australia India Chamber of Commerce

2023 is the year when the trade barriers between India and Australia come crashing down, securing Australia’s access to the world’s fastest growing large economy.

The barriers started to fall with the Australia-India Economic Cooperation and Trade Agreement which came into effect in 29 December, 2022. More is on the way, as ECTA is a stepping-stone towards a full Australia-India Comprehensive Economic Cooperation Agreement (CECA).

Over the next 20 years, it is obvious that a growing India will need many of Australia's goods and services, including agriculture, critical minerals, education and skills training, and healthcare.

Why is this exciting? India has the second largest population in the world at 1.4 billion – and growing fast. Significantly, India has the youngest population – about 600 million Indians are below the age of 25 – that is over half the population – and more than 808 million are below the age of 35.

A young population creates massive demand, for almost everything. No other trading partner of Australia offers this advantage.

India simply cannot meet the growing domestic demand for education, healthcare, mineral resources, infrastructure, technology, services, food and agribusiness, defence and security and innovations of all kinds.

Three stand out areas

Three areas stand out, but it is important to remember this deal covers virtually everything.

First, agribusiness is a real winner - the agreement eliminates or reduces tariffs on nearly 90 percent of our current food and agricultural exports to India. This includes sheep meat, wool, horticulture, fisheries, fruit, cosmetics and forestry products. Australian exporters will also gain preferential tariff quotas for lentils, citrus, almonds, cotton and pears.

Within agribusiness, wine might be the biggest winner. India used to impose 150% tariffs on imports of all wine and spirits – now Australian wine exporters will incur a 75% tariff rate on bottles with a value greater than US$15. This ‘premium wine’ rate will fall to just 25% over 10 years.

Demand for quality wine is being driven by a young, educated and urban population – mainly by young women.?

Second, services for India is already a large market at around A7 billion per year, and this opens more opportunities. India is Australia's third largest services export market. This includes higher education and adult education, business services, research, communication, construction, engineering, health and medical, insurance and banking

Education is the biggest export we don’t source from the ground. India is Australia’s second-largest source of international students. Export value of India in the Education sector was AUD 6.2 Bn in 2020. As of December 2021, there were 129,864 Indian students enrolled at Australian institutions. Growth and change are ahead.

Third, the people-to-people aspect of our relationship will grow as a result of this deal. Importantly, the trade agreement will support tourism and workforce needs in regional Australia by making 1,000 Work and Holiday Program places available to young Indian travellers.

With steps towards students staying longer to work, mutual recognition of qualifications and a focus on two-way tourism, the people of our two countries will be closer than ever. ECTA will support the establishment of a Professional Services Working Group for the future facilitation of the streamlining of the recognition of qualifications, licensing and registration procedures, including through the mutual recognition arrangements between professional services bodies.

In the past Australia’s relations with India were low key and trade was low volume. Then a few things happened – China became difficult, global stability rocked and India’s economy grew more than others. So, now we are getting closer to India. The future might see India and Australia as the closest and largest among countries of the Indian Ocean. It’s exciting to be part of this change.

Some “watch outs” for future exporters

But the new era comes with some warnings. Exporters need to be reminded that India is not one market – the variations are enormous, such as 29 languages. Cultural and business differences can be segmented into north, south, east and west, each with different ways of doing businesses. Then there are five megacities (defined as 10m plus) – New Delhi (over 27m), Mumbai (over 20m), Bengaluru, Chennai and Kolkata. There will be two more by 2030.

It is not wise for business to try to enter such a complex market by “going it alone”. Talk early and often to Austrade, to State Government Business Offices there and to organisations like the AICC.

And a final warning for exporters – if you just sell into India on price, you might do OK today but for how long? India is known as a “relationship” culture – the key is to be there, use local Indian teams, have a presence, join in, be seen. The door is open.

Contact Harish Rao [email protected]

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