PM Albanese in India: A Natural Momentum to a Comprehensive Strategic Partnership

The Comprehensive Strategic Partnership between India and Australia rests on the pillars of trust and reliability. Australian PM Albanese has just completed a successful 4-day visit to India this week (8-12 March 2023), which took him to Ahmedabad for the cricket connection, Mumbai for the business and defence ties and New Delhi for the ceremonial part of the visit. With greater convergence of views on issues such as international terrorism, and a shared commitment to a rules-based order in the Indo – Pacific, the two countries have taken their cooperation further and the Quad participation by both, when it was revived in 2017 with USA and Japan sealed a burgeoning strategic partnership. The Indian diaspora in Australia has reached the 976000 mark, making them the second largest group of overseas born residents in Australia, and Indian students in Australia currently number close to 100,000. Defence relationship between India and Australia has moved at a fast pace. Australia is now a regular participant in the Malabar Naval exercises with India, Japan and USA, and will host the quadrilateral exercise for the first time this year. India will make its debut in Australia’s largest multi-nation “Talisman Sabre” exercise in July – August 2023. 2023 is envisaged to be busier than ever for India- Australia defence cooperation.

A number of high-level visits from both sides have helped to make quick progress in this relationship. In September 2014, PM Tony Abbot visited India, and in November that year, PM Modi became the first Prime Minister to visit Australia since Rajiv Gandhi in 1986. By about 2018, the two countries had also stepped up the economic engagement, after the publication of the India Economic Strategy to 2035, and a reciprocal Australia Economic Strategy by India, which I was tasked to draft in association with CII and KPMG by the Minister of Commerce and Industry. The Australia Economic Strategy Repot identified 20 sectors of cooperation – 12 in the traditional areas of trade and investment and 8 in futuristic fields and technologies. These reports were both in place by the end of 2020, and subsequently, Australia came up with an update to their economic strategy report, completing the circle of identified opportunities and areas where businesses from both sides could expand their engagement.

At the India Australia Leaders Virtual Summit in June 2020, PM Modi and PM Scott Morrison transformed therelationship to a Comprehensive Strategic partnership. A Mutual logistics Support Agreement was inked and the Defence Research organizations of the two countries embarked on a joint programme through a formal MOU. A 2+2 Ministerial Dialogue was held in 2021. At the second India – Australia Virtual Summit in March 2022, several key announcements were made, including a Letter of Intent on Migration and Mobility Partnership Arrangement to foster exchange of skills, and a Letter of Arrangement for Educational Qualifications Recognition to facilitate mobility of students and professionals. The countries signed a Letter of Intent on New and Renewable Energy in February 2022 which provides for cooperation towards bringing down the cost of renewable energy technologies, especially ultra-low cost solar and clean hydrogen. Both countries have a convergence of strategic interest in the Pacific Island States. During the virtual Summit in 2022, India announced matching funds of AUS $ 10 million for Pacific Island countries under the Infrastructure for Resilient Island States (IRIS) and of AUS $ 10 million for Pacific Island countries under the International Solar Alliance (ISA).

The Morrison government unveiled plans to invest $280 million to further the growing economic ties and support jobs and businesses in both countries. These include US$ 7 million to support cooperation on research, production and commercialization of clean technologies, critical minerals and energy US$ 25.2 million to deepen space cooperation with India and US$ 28.1 million to launch a center for Australia India relations. On 3 September 2022, the Albanese government announced that Australia will increase its permanent immigration numbers by 35,000 to 195,000 in the current financial year to mitigate skill shortages. The large population of the skilled younger generation in India was presented with an opportunity. 2022 saw 18 ministerial level visits from both sides. A week before the Albanese visit the far-reaching Mechanism for Mutual Recognition of Educational Qualifications was signed on March 2, 2023. The scope of the Australia – India Education Council has been widened to include cooperation in skills development. $ 1.89 million has been set aside by Australia for developing skills in Agriculture. Deakin University and Wollongong university from Australia announced opening of their campuses in India in Gift city in Gujarat. Following the announcement of the New Education Policy (NEP) by India, there is movement on increasing research collaboration between Indian and Australian universities, and dual degree programmes between universities. The University of Melbourne, for instance, is partnering with University of Madras, Savitri Bhai Phule Pune University and Gandhi Institute of Technology and Management, Hyderabad to offer a new Bachelor of Science dual degree.

While there are important long-term trends in the bilateral relationship, the visit of PM Albanese last week was focussed on defence, clean energy, education and economic spheres, and saw MOUs in Sports cooperation, Audio visual Co -Production as well as the signing of the terms of reference for a Solar Task force between the two counties. A task force on Green Hydrogen was also set up, and the Atal Innovation Mission under the Niti Ayog signed an MOU with the Commonwealth Scientific and Research organization (CSIRO). There was broad agreement on cooperation in Science and Technology, especially vaccines, where Australia and India are working together bilaterally as well as under the aegis of the Quad, the strategic and security domain, renewable energy and critical minerals, a future Migration and Mobility policy Agreement, and co production/ joint development in defence under the Make in India programme. The CEOs forum which had not met for a while was revived, and met in Mumbai.

Australia aims to make India one of its top three export markets by 2035, and also the third largest in Asia for Australian Investments. The India Australia Economic Cooperation and Trade Agreement (Ind Aus. ECTA) signed on April 2, come into force on 29 December 2022. The Agreement provides duty free access to Indian exporters in over 6000 broad sectors, including textiles, leather, furniture, jewelry, and machinery in the Australian market. Australia is offering zero duty access to India for about 96.4%of exports (by value) or 98% of the traded tariff lines from day one. Around 113 remaining tariff lines – amounting to 3% of Indian exports – will be phased out over the next five years. India has successfully negotiated protection terms for its dairy sector and sensitive agricultural items like chickpeas, wheat, rice, bajra, sunflower oil, and sugar. In the non-agricultural sector there is an exclusion list of items like silver, platinum, jewelry, and iron ore. Conversely, the Agreement will give about 85 % of Australia’s exports zero duty access to the Indian market, including coal, sheep meat and wool, and lower duty access on Australian almonds, lentils, and certain fruits like oranges, mandarins, pears, apricots and strawberries. Zero duty access for Australia is set to increase to cover 91% of its exports by value and over 70% of India’s tariff lines over 10 years. Australian LNG, alumina and metallic ores will also not attract any tariff while tariffs on Australian avocados, onions, pistachios, macadamia nuts, cashews in shell, blueberries, raspberries, and black berries will see tariffs eliminated over 7 years. Import duties on Australian wines will be significantly slashed, but not eliminated fully, and gradually brought down over 10 years as per price per bottle.

The agreement will facilitate student exchange, professionals and tourists. Indian graduates from STEM (Science, Technology, Engineering and Mathematics) will be granted extended post study work visas with a bonus year of stay. Australia will also set up a programme to grant visas to 1000 young Indians to pursue working holidays in Australia. 1800 Indian traditional chefs and yoga teachers will be able to enter Australia as contractual service providers. Detailed provisions to pursue mutual recognition of professional services and other licensed regulated occupations are in the form of an Annex on professional services annexed to the trade in services chapter. These comprise elements such as coverage of all licenses and regulated occupations, allow for temporary / project specific license where feasible and establish a mechanism of working group to pursue obligations related to this issue. This has paved the way for initiating dialogues on Mutual Recognition Agreements (MRAs) in Nursing, Architecture and other professional services between the professional bodies of India and Australia. Australian service suppliers will benefit from full or partial access across more than 85 Indian service sectors and sub sectors. Australian suppliers across 32 sectors and subsectors will be guaranteed the highest standard of treatment that India grants to any future free trade agreement partner. India will grant access to Australian single brand retailing franchises and internet service providers. There has been agreement on an enhanced commitment on the movement of professionals as intra corporate transferees.

Australia is a major exporter of key resources, some of which India needs to import to sustain its economic growth. For example, coal accounts for 74 % of Australia’s exports to India and attracts a duty of 2.5 %. The elimination of duties on coking coal is expected to boost the completeness of Indian steel exports. India imports 54 % of its natural gas and Australian companies have an opportunity there. India’s market of 1.3 billion, diversified economy, and growth trajectory present significant opportunity for Australian businesses, including in education, agriculture, energy, resources, tourism, healthcare, financial services, infrastructure, science, innovation, and sport. The agreement could create enormous trade diversification opportunities for Australian producer and service providers bound for India, valued at up to US$ 15 billion each year.

During 2022, an MOU signed between the two partners envisages US$ 6 million an initial funding to be shared equally by both towards an ambition to develop secure, robust and commercially viable critical minerals supply chains. Australian commitment to Aus.$ 8 million to a three-year bilateral critical mineral’s investment partnership with the aim of lowering emissions and boosting the use of renewable energy has also materialized.

In the Australia India relationship, Investments are bound to play a big role. Opportunities for Australian businesses are available under India’s national monetization plan pipeline, which plans to monetize about US$ 81 billion worth of brownfield assets over the period of 2022-2025. Some interesting sectors for Australia are roads and railways, power, public warehouses, civil aviation and port infrastructure, sports stadia, and mining assets. Australia has A$ 2.3 trillion pension fund sector that could be a regular source of investments in the India infrastructure and disinvestment story. Besides the defence and space sectors, the Production Linked Incentive (PLI) schemes unveiled by the Indian government in 17 sectors have a number of areas for manufacturing incentives for Australian companies.

During the Albanese visit, both sides announced that they were working on a Comprehensive Economic Cooperation Agreement and hoped that the process will be completed this year. The ECTA has covered trade in goods, limited trade in services including movement of natural persons, customs and trade facilitation, rules of origin, sanitary and phytosanitary measures, technical barriers to trade and trade remedies, dispute settlement, movement of natural persons, telecom and customs procedures, and pharmaceutical products as well as cooperation in other areas. Under the Full CEPA (Comprehensive Economic Partnership Agreement), negotiations for which got underway in New Delhi on 26th September 2022, the two sides are looking at government procurement, Investment, Energy and Resources, Intellectual Property Rights, trade and gender, Sustainability and Digital trade. Other areas like critical minerals (essential for the Indian e-mobility programme), space technologies and opportunities in the digital sector are also under discussion. Soon after the Prime Ministerial visit was over, the trade ministers of both sides met through the mechanism of the Joint Ministerial Commission on 11 March 2023, and announced that they aimed to take their bilateral trade to $100 billion in the next five years through a deal that will target new areas such as critical minerals, mobility, education, sports, space and defense being opened up to each other.

There is no doubt that regardless of the geo political factors which have brought the two countries close to each other, the partnership has now acquired a momentum of its own. Governments however, can only provide a policy framework – it is up to big businesses to take the trade and investment relationship forward. Australian investments in India will mean much need diversification for Australian economy, and Indian investment in critical minerals and commodities sectors will drive and power the Indian economic surge. Along the way, pinpricks like the attacks on Hindu temples in Australia and on the Indian diaspora in general need to be prevented and avoided and the Australia Federal and State authorities will need to pay special attention to this aspect. Both countries now have a mature relationship which can take care of these minor irritants. Enhanced people to people contacts and increase in tourism will add to the understanding of each other.

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