India is the largest democracy in the world, has one of the fastest-growing major economies, is a technology superpower, and is a major power. India was Australia’s seventh-largest trading partner and sixth-largest export market in 2020. This was mostly because of coal and international education. People-to-people ties are at the heart of the relationship between India and Australia. The Indian diaspora is growing and making economic and cultural contributions to Australia.
The relationship between India and Australia seems to be at an all-time high, with three meetings at or near the summit level happening in less than a month. The trade ministers of India and Australia, Piyush Goyal and Dan Tehan, signed the India-Australia Economic Cooperation and Trade Agreement (ECTA) on April 2, 2022. Prime Ministers Narendra Modi and Scott Morrison watched the ceremony online. The treaty, which has been called a “watershed moment” in the history of relations between India and Australia, aims to raise the status of relations between the two countries.
Both Countries’ Economies are Linked
In 2020, Australia spent $15.4 billion on investments in India. Foreign direct investments that went both ways were worth $1.4 billion in 2020. The relationship between India and Australia has been upgraded to a Comprehensive Strategic Partnership (CSP). This means that both countries have agreed to increase trade and investment flows to help their economies. India and Australia are resuming talks on a bilateral Comprehensive Economic Cooperation Agreement (CECA) and moving forward with cooperation in many areas, such as critical minerals, health, critical technology, science, and agriculture.
The India Economic Strategy (IES), written by Mr. Peter Varghese, who was Secretary of the Department of Foreign Affairs and Trade (2012-2016) and High Commissioner to India, is the basis of Australia’s economic relationship with India (2009-2012). In July 2018, an independent report called the IES was given to the Australian Government. In November 2018, the Australian Government gave an initial plan for putting the IES into action as a response to the IES. In 2020, India released its report, the India Economic Strategy, which was also led by the private sector.
In 2020, education will make up about 88 percent of all of Australia’s service exports to India, worth $6 billion and making up about 88 percent of the total. In Australia in 2020, there were 115,137 Indian students.
Australia India Business Exchange (AIBX) is a programme started by the government of Australia to encourage more business partnerships between India and Australia. AIBX offers a number of services to help Australian businesses start-up and grow in India. These services include industry-specific insights and advice on doing business with India and getting into India’s online retail market.
Economic Cooperation and Trade Agreement between India and Australia
In the past few years, relations between India and Australia have changed for the better, leading to the formation of a friendly partnership. This is a unique partnership based on shared values of pluralistic, parliamentary democracies, Commonwealth traditions, growing economic engagement, long-lasting ties between people, and more interactions at the highest levels. The India-Australia Comprehensive Strategic Partnership, which was started at the India-Australia Leaders’ Virtual Summit between His Excellency Shri Narendra Modi, Hon’ble Prime Minister of India, and His Excellency Mr. Scott Morrison MP, Hon’ble Prime Minister of Australia, on June 4, 2020, is the basis of many different kinds of relations with each other.
Growing India and Australia have strong and stable economic and business ties that help their relationship, which is quickly becoming more diverse and deeper, grow and stay strong. India and Australia have done a lot of business with each other. The quality of these economic and business ties between the two countries has kept getting better over time. India’s 17th largest trading partner is Australia, and Australia’s 9th largest is India. In 2021, the value of goods and services that India and Australia trade with each other will add up to USD 27.5 billion. Between 2019 and 2021, India sent 135 percent more goods to Australia than it did in 2019. India’s exports in 2021 were worth US$ 6.9 billion and were mostly made up of a variety of finished goods. In 2021, India bought goods from Australia worth $15.1 billion. Most of these were raw materials, minerals, and intermediate goods.
India, Australia, and Japan are all part of the trilateral Supply Chain Resilience Initiative (SCRI), which aims to make supply chains in the Indo-Pacific region more reliable. India and Australia are also part of a new group called the Quad, which also includes the United States and Japan. The goal of the Quad is to improve cooperation and build partnerships on a range of issues that affect all four countries.
India-Australia trade ECTA is the first trade deal India has made with a developed country in more than ten years. The Agreement covers things like Trade in Goods, Rules of Origin, Trade in Services, Technical Barriers to Trade (TBT), Sanitary and Phytosanitary (SPS) Measures, Dispute Settlement, Movement of Natural Persons, Telecommunications, Customs Procedures, Pharmaceuticals, and Cooperation in Other Areas. In addition to the Agreement, eight separate letters on different topics of economic cooperation between the two countries were also signed.
The India-Australia ECTA will strengthen the already strong, close, and strategic ties between the two countries. It will also increase bilateral trade in goods and services, create new jobs, raise living standards, and improve the general welfare of the two people.
The ECTA gives the two countries a way to make trade easier and more profitable. The ECTA between India and Australia covers almost all of the tariff lines that India and Australia trade with each other. Australia will let India have preferential market access to all of its tariff lines. This includes gems and jewellery, textiles, leather, shoes, furniture, food and agricultural products, engineering products, medical devices, and cars. India, on the other hand, will give Australia preferential access to more than 70% of its tariff lines. This includes lines that Australia wants to export, which are mostly raw materials and middlemen like coal, mineral ores, wines, etc.
India and Australia’s trade in goods and services went from USD13.6 billion in 2007 to USD24.3 billion in 2020. This made India Australia’s seventh-largest trading partner. With the AI-ECTA and the expected end of the CECA, this number will only go up because jobs will be made, businesses will get stronger, and cooperation between key sectors in both countries will grow.
The ECTA will allow the economies of the two countries to reach their full potential. Prime Minister Modi was right when he said, “This is a turning point in our relations.” India and Australia are becoming more economically connected, which shows that democracies are working together to keep the Indo-Pacific region stable by making supply chains stronger.
Australia has a strong interest in improving relations with India not only as an important trading partner but also as an emerging strategic partner. The two countries broadly share objectives of stability, openness, and rules-based order in the Indo-Pacific. India and Australia share an interest in existing regional multilateral institutions in the Indo‑Pacific, especially the EAS, for promoting economic integration and strategic stability. Australia also supports India’s inclusion in the APEC. Australia is well-placed to supply India’s industrial and infrastructure development needs. At the same time as Australia’s limited domestic manufacturing base provides an opportunity for India to contribute to Australia’s imports of manufactured goods and particularly refined oil.