Parliament’s passing of the new Australia-India Economic Cooperation and Trade Agreement (ECTA) on 22 November will be crucial in accelerating bilateral economic relations. These currently lag behind our strategic and defence relationship, which has been significantly advanced through the Comprehensive Strategic Partnership and the Quadrilateral Security Dialogue.
This milestone paves the way for Prime Minister Albanese’s visit to India in March 2023 to cement the Comprehensive Economic Cooperation Agreement (CECA).
The ECTA significantly reduces, or eliminates, tariffs across 31 sectors and sub-sectors and amends Australian tax law to stop the taxation of offshore income for Indian firms providing technical services into Australia. To give perspective, 85% of Australian goods exports to India will see tariffs removed immediately, with a further 5% to have tariffs phased out over the next 10 years.
The added mobility and mutual recognition of qualifications granted in the ECTA will allow much greater interchange of ideas and skills between the two nations, but it should also form the basis of deeper business and cultural understanding.
The ECTA presents Australia unprecedented access to the world’s fastest growing major economy, – projected to become the third largest by 2027 – with a pro-business mindset, political stability and an immense talent pool. It also provides a strategic opportunity to diversify trading partners.
India stands to gain from greater access to world class goods and services, different supply chains and skills as it strives to become a global manufacturing hub – the aim of Prime Minister Modi’s ‘Make in India’ and ‘Self-reliant India’ flagship programs which are critical to the employment growth of the country.
These new settings provide the basis for expanding and accelerating the trade relationship beyond what has historically been a narrow commodities and resources base to new and different areas spanning sectors, including agribusiness, education, pharmaceuticals, science, technology and engineering, and business services.
Importantly it also provides the opportunity for both countries to reimagine global supply chains in critical minerals relevant to high growth fields such as critical technologies, defence and energy transition.
Whilst these new trade settings are welcome, it will be important for companies on both sides to carefully assess ECTA benefits in the context of the other country’s business and regulatory frameworks. Australian exporters should, for example, model the pricing of goods into India and factor in any nuances of Indian Customs regulation with regards to valuation and transfer pricing documentation.
A paradigm shift in investment mindset is fundamental to achieving the ambition set out in Australia’s India Economic Strategy for India to come within Australia’s top 3 trading partners by 2035.
Australia and India should work towards scalable investments in priority sectors such as resources and renewable energy, technology, infrastructure and education which are whole of nation efforts involving large business, entrepreneurs, academia, R&D and policy makers. This will create true strategic interdependency which is key to a long term mutually beneficial relationship and economic prosperity.
Previous experience suggests that economic relationships that are purely transactional and ignore the importance of sociocultural exchange in strengthening ties are susceptible to volatility and shifts in geostrategic and political shifts. Deepening the partnership through improved people-to-people links will be key.
In this regard the Indian diaspora in Australia has a key role to play. DFAT has declared Australia’s Indian diaspora a “national asset”, but this alone means little without active engagement and real action on the ground.
Energising the diaspora here and pushing constructive engagement including their contribution towards building business and cultural literacy will have broad mutual benefits.
At a recent KPMG event in Sydney, M.R. Rangaswami, the founder of US-based Indian diaspora global leaders network Indiaspora, said the Indian diaspora is able to play an outsized role in entrepreneurialism and social impact given its place in the global community of around 32 million non-resident Indians. Former CEO of PepsiCo, Indra Nooyi, explained that she would always be a “hyphenated citizen” and that her experience growing up with a diverse Indian community was a major benefit when building relationships at the highest levels of global business.
Both nations should deploy a broad-based set of success measures in establishing a long-term sustainable relationship. This would include near to mid-term targets around major investments in priority sectors, regular CEO to CEO dialogue, Indian diaspora incremental contribution to scalable start-ups, and Indian origin representation in civic life and corporate leadership.
The Centre for Australia-India Relations, as funded in the October Federal budget, will play a critical role in orchestrating a trusted trade and investment climate between the two nations.
Whether or not this is ‘India’s decade’ or ‘India’s century’, now this is the time for Australia to seriously engage with India.
Read More at https://newsroom.kpmg.com.au/people-to-people-at-the-heart-of-unlocking-historic-australia-india-trade-deal/