India, Australia in a geoeconomic partnership
The current trend in geo-economy favors the development of investment and trade relations with reliable partners. The Comprehensive Strategic Partnership between India and Australia announced in June 2020 along with agreements on providing mutual logistic access and enhancing defense and security cooperation spurred their relationship. Their partnership in the quad and participation in Malabar exercises have strengthened their shared security outlook. Trade ministers of Australia, India and Japan have announced the broad outlines of a resilient supply chain initiative.
Recent Indian reforms in the mining, banking, MSME, agriculture, energy, defense, space, electronics and textile sectors have been far-reaching. Stimuli have been announced in a number of sectors under a production-linked stimulus program to boost production. New funding has been announced for the health sector. The corporate tax rate has been lowered, retrospective taxation has been abolished, and India is now focusing on easing the difficulties of land acquisition, labor law reform and liquidity to attract new investment.
An India Economic Strategy to 2035 Report released by Australia in November 2018 and a reciprocal Australia Economic Strategy Report released by India in 2020 both set the roadmap for the future. The Australian Government’s 2018 report update was released on March 22 – responding to rapidly changing global developments, the need to ensure secure supply chains and ongoing Indian reforms and developments in the country.
Australia also announced initiatives to address bilateral investment cooperation in emerging sectors such as critical minerals, clean energy, cyber and critical technologies and space, as well as in the priority sectors of infrastructure, education, tourism, agribusiness and energy.
Ideal strategic partner
India has emerged as an ideal strategic partner for Australia as it strives to meet the challenges of rapid urbanization and infrastructure development, resources such as clean water, digital connectivity and healthcare facilities for its growing and burgeoning population.
There are excellent prospects for cooperation between India and Australia in some critical areas such as Science, Vaccines, Pandemic Management, Space and Defence, Critical Minerals and Related Technologies, Water Resources, Education and Training, Circular Economy, Waste to Wealth Processes, Grain Management and logistics as well as cyber technologies.
India, along with Australia, needs Australian raw materials such as lithium, cobalt, vanadium, rare earths, coal and LNG for its development needs, as well as technologies to solve problems in areas such as financial inclusion, healthcare and education.
Australia has reserves of 21 of the 49 minerals identified as critical to India’s future strategy, particularly the e-mobility program. The New Education Policy in India has opened up opportunities for further collaborations with Australian universities. New opportunities for cooperation have opened up in the defense and space sectors. India has a large technology resource pool that complements Australia’s requirements. Australian superfunds and infrastructure companies are increasingly offering opportunities in the infrastructure and toll road sectors.
Investment is already driving trade relations between India and Australia – around US$20 billion has been invested by them in each other’s economies. Bilateral trade is poised to surpass $27 billion this year. However, the liberalization of trade and services and moves to make it easier to do business will add immensely to this momentum.
Goods, services, rules of origin, sanitary and phytosanitary measures, customs procedures, and legal and institutional issues, including dispute settlement, have been included in the agreement. Over 95 percent of Indian goods will be given duty-free access on the first day of the pact’s entry into force, with the rest earmarked for gradual concessions. About 70 percent of Australian goods receive reduced customs access from day one.
India will benefit from duty-free access for a variety of labour-intensive sectors such as textiles, gems and jewellery, leather and footwear, as well as a liberalized visa regime facilitating the free movement of professionals. Sensitive sectors such as dairy, sunflower oil, wheat, rice, walnuts, medical devices, beef, etc. have been kept out of the deal, while Australian wines will be cut from 150 per cent to 25 per cent over 10 years in two categories and so cares about the domestic Indian wine industry. Australian coal, which is subject to a 2.5 percent duty, will also have duty-free access.
The liberalization of the service sector in 100 different sub-sectors will encourage immigration of professionals. The companies will now view with renewed interest the opportunities offered by this agreement.
The author is a former Secretary (East) in the MEA. He is currently a Distinguished Fellow of the Vivekananda International Foundation, New Delhi