Indo-Australia bilateral business relations
Author: – Mr. S. Prabhakar
With the inking of Australia-India Economic Cooperation and Trade Agreement (AI ECTA) on 2nd April, 2022 the bilateral trade initiatives have been brought on to the centre stage. The then Australian Prime Minister Mr. Scott Morrison said “the agreement opens a big door into the world’s fastest growing major economy for Australian farmers, manufacturers, producers and so many more would create enormous trade diversification opportunities for Australian producers and service providers bound for India, valued at up to $14.8 billion each year’’.
Indian Prime Minister Mr. Narendra Modi said that “this Agreement is a watershed movement for bilateral ties between both the countries and that the agreement would make it easier for both countries to exchange students, professionals and tourists which in turn would strengthen ties’’.The then Australian Minister for Trade, Tourism and Investment Mr. Dan Tehan said that the “AI ECTA would further strengthen the people-to-people links between our countries’’.
As per AI ECTA, Zero duty access will be given to more than 85 per cent of Australian goods exports to India and in turn India has made 96 per cent of Indian goods imports from Australia duty-free.This is expected to boost bilateral trade in goods and services to $45-50 billionas against $ 27 billion in the Financial Year 2020-21 and create one million jobs in India over the next five years.
Goods and services exports from India to Australia are expected to reach $20 billion in the Financial Year 2027 and $35 billion in the Financial Year 2035. Merchandise exports to Australia had grown faster than exports to any other country in the Financial Year 2022.
What AI ECTA has to offer?
What makes investments in India attractive to Australian Entrepreneurs?
• Democratic country with stable Government: India is a democratic and secular country, has robust Judicial system upholding the Rule of Law, strong Federal system and Freedom of Speech. The present Government at Centre which is in its second 5-year term offers a very stable Government.
• Strong economic growth: India, tipped to be world’s fastest growing economy. The Economic Survey for 2021-22 projected GDP growth rate of around 8.5% for theFinancial year 2022-23.IMF has projected a GDP growth rate of 9% for this fiscal year.
• India is a large and ever-expanding Market: India is the second most populous country with over 1.3 billion population and being fifth largest economy in the World offers a huge and ever-expanding market. With growing consumerism and purchasing power, Indian consumer market is expected to double by 2025.
• Ease of doing business: Both Union Government and every State Government in India are putting in place various measures towards ease of doing business to attract investments into India and various states.
• Single window clearance system: Government of India under the Prime Minister’s leadership is laying red carpet for all global companies to come and establish their presence in India.Very few countries of the world offer the kind of opportunities India does.
The Government of India is in the process of developing National Single window system for a seamless process of granting most of the approvals for setting up business in India by foreign investors.
• Simplified Indirect Tax regime: Government of India has heralded the biggest tax reforms through Goods and Services Tax (GST) subsuming many indirect taxes. It has eliminated the cascading affect of `tax on tax’ and made life easy by smooth and unified on-line accounting and compliance processes.
• Easing FDI norms: Government of India has raised the limits of Foreign Direct Investment to 100% in various sectors and also put them on `automatic route’. Tax concessions and concessional customs duty and tax holidays are offered to attract FDI.
• Huge Human Capital: with largest young population in the world, premier educational institutes producing large number of highly competitive professionals in the fields of Engineering, Medicine, Financial & Accounting, and General management streams, constant and sustained efforts on skill development of the inexpensive labour force, India offers a huge Human Capital.
• IT capital of the world: Indian IT industry has emerged as the fastest growing industry in the last three decades and has become an engine of accelerated economic growth. India produces largest number of IT professionals every year. IT services industry accounts for more than 50% of the export and the industry is on the course to achieve 300 to 350 billion USD annual revenue by 2025.
• A growing technical hub: India is emerging as a major technical hub and an alternative to China. Apart from large number of assembling units, manufacturing units are also coming for manufacture of smart phones, computers and other digital equipments. India is the second largest manufacturer of smart phone in the world.
• Start up and Technology Innovation: Indian Government is according highest priority to starts ups and technology innovations as a vehicle of transformation. Many young professionals with strong technical background had trail blazing success in start up space and attracting a lot of foreign investments.
• Outsourcing Powerhouse: India, the pioneer of the offshore IT and Business Process outsourcing, has emerged as the Powerhouse of outsource from US, Europe and many other countries of the world. Large pool of technically qualified professionals, cheaper skilled labour force with proficiency in English, extremely favourable Government policies have given unassailable advantage to India over other countries.
• Robust financial system: India has a very robust financial system comprising of Banks, Financial Institute, Non Banking Finance Companies, Mutual Funds, Insurance and Capital markets. India has one of the largest capital markets – both primary and secondary.
As per the Indian Economic Strategy to 2035 commissioned by Australian Government, India offers far better growth opportunities for Australia Business than any other country.
Whichever part of the Globe one may be in, India is an important part of business strategy. The role played by India in international community is enormous.The new India offers great opportunity and potential, and the businesses in Australia should look at India as an opportunity to be captured.
Both countries are now focusing on investment led strategy besides the trade led business relations.ar. Government, through various measures aiming to improve investment and consumption, demands to boost GDP.
- Health care, Agri based business, Mining, Education and Infrastructure being the top five sectors with high potential. Other Industries offering great business opportunities to Australian entrepreneurs are:
- • IT/ITES
- • Biotechnology and pharmaceuticals
- • Rail and Road Infrastructure
- • Material science and technology
- • Renewable energy
- • Tourism and Hospitality
Indians and Australians have always been natural partners. It is the right time for Australian entrepreneurs to have their presence in India and develop long-term relationships with Indian entrepreneurs.
Australia has announced Rs. 1500 crores investment into India during the virtual summit between India and Australia premiers in March, 2022. These investments will be done in clean technologies, space and innovation.
Opportunities for Indian entrepreneurs to expand their foot print to Australia
• Australia is one of the easiest places in the world to do business and has become the most popular destination for Indian entrepreneurs.
• 6th largest nation in the world, a federal democracy multi cultural country and an English-speaking country with 99 percent literacy.
• According to World Bank Ranking in 2020 Australia stood at seventh for starting business fourth in gaining credit and fourteenth in ease of doing business.
• Australia is blessed with cleanest Air, water and excellent whether and four Australian cities are ranked in the top ten cities for quality of living in global index.
• Australia GDP stood at 1.3 trillion USD in 2020 ranking 15th in the world. 11% of GDP coming from Mining.
• Australia per capital income is USD 52000 in 2020 i.e.10th in the world.
• World Bank rated Australia 14th in the rank of business-friendly countries. Ranked 7th in starting a business and 4th in getting credit.
• Australia is a major global commodity producer of natural resources such as coal, iron ore, uranium, gold, natural gas and lithium.
• In recent years, Australia is focusing more on health and education, mining, financial and insurance services, construction and manufacturing, tourism, scientific and technical services, agriculture, forestry and fishing.
• Under the AI ECTA Indian medicines will be accorded faster approval process by Australian regulators.
• The Indian IT industry concern regarding double taxation will be addressed by Australia Government by stopping the taxation of offshore income of Indian firms providing technical services to Australia.
• Indian origin population is the fourth largest migrant community in Australia and is expected to overtake Chinese population by 2031. They are highly educated and employable.
Major imports into Australia
• Machineries, computers
• Crude oil
• Cars, trucks
• Electrical machinery, smart phones
• Gems and precious metal
• Pharmaceuticals and medical equipment
• Furniture, bedding and lightings
India is a dominant player in many of the above industries and the Indian businesses would be imminently benefitted by focusing on Australia.
Major attractions in Australia are:
• Safe and vibrant society
• Excellent and pollution free weather
• Unique geographical attraction
• Educated and English speaking population
• Supportive government at all levels
• Free education to kids
• Free Government health care facility
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*The Author S. Prabhakar, is a Fellow member of the Institute of the Company Secretaries of India, Chartered Secretary from UK, Lawyer and Registered Insolvency Professional.For enquiries, please contact Ms. Geetanjli Aggarwal, ACS, Head – Bengaluru Branch at email@example.com