How India-Australia relations are set for deeper commitment

ECTA has become a symbol of what is possible in the relationship

PTI03_09_2023_000101B Straight drive: Prime Minister Narendra Modi and Australian Prime Minister Anthony Albanese at the Narendra Modi stadium in Ahmedabad | PTI

THE SECRET OF LOVE, according to the pop diva Cher in her ‘Shoop Shoop Song’, is “in his kiss”. But in the diplomatic world, it is the playlist. At the banquet for Australian Prime Minister Anthony Albanese in Delhi, in the midst of the background score of the Mahatma’s favourite bhajan ‘Raghupati Raghav Raja Ram’, were two songs from the Aussie pop bands The Triffids and The Go-Betweens. Their biggest hits―unsurprisingly, both heartbreak songs―were strummed for a blossoming romance between India and Australia.

For Albanese, it was personal. The Triffids features on the top of his playlist. He played ‘Wide Open Road’―the song chosen for the banquet―on loop as a young man as he drove with his girlfriend to Perth to watch the band perform. Two and a half months after the Economic Cooperation Trade Agreement between India and Australia came into force on December 29, Albanese flew to India to convey his commitment to the deal.

Trade is certainly a game-changer. While the strategic shift towards the Indo-Pacific was visible in the past few years, the trade agreement has set the tone for a deeper commitment. Albanese’s three-day visit was very much a display of his intentions and of how important India has become―he played Holi, visited IIT Delhi and travelled to Mumbai with 25 CEOs to attend the first India-Australia CEO conference. At a function in Mumbai, Australian minister for trade and tourism Don Farrell said that $2.5 billion worth of trade benefitted from the lower tariffs under the ECTA.

The ECTA―which had been through nine rounds of negotiations and was almost abandoned midway―has now become a symbol of what is possible in the relationship. It gives Australia the much desired access to the Indian market and a first-mover advantage over the much-hyped-but-yet-to-be-signed US-India and UK-India trade deals.

Touted as a win-win, the ECTA ensures duty-free access for Indian goods in some 6,000 sectors, including textiles, leather, furniture, jewellery and machinery, to the Australian market. In return, India has opened up its markets for critical minerals, pharmaceuticals, cosmetics, lentils, seafood, sheep meat, horticulture and wine.

The trade between India and Australia in 2021 was at $34.3 billion. It is estimated to go up to $50 billion in five years. The Global Trade Research Initiative, a think tank, says it may even go up to $70 billion. “The ECTA has probably given a psychological boost for businesses that thought India was a hard market to crack,” said Navdeep Singh Suri, former Indian ambassador to Australia. The agreement was negotiated soon after India walked out of the Regional Comprehensive Economic Partnership because of China.

Albanese’s visit was also symbolic of the people-to-people connection. The Aussies clearly want closer bonds and the ECTA opens up new avenues for Indians. Australia will welcome 1,800 new Indian chefs and yoga instructors and also grant Indian students work opportunities after their education. The next step will be the mobility agreement. The mutual recognition of Australian and Indian education qualifications will be a game-changer. Indian students contributed $6.4 billion to the Australian economy in 2019, the biggest after China.

The relationship has come a long way. “Australia will not be at the periphery of our vision, but at the centre of our thoughts,” said Prime Minister Narendra Modi while visiting Down Under in 2014. He had to wait for the last leg of his second term for that to bear fruit. The economic benefits―very much a Modi plank for a reach out―has only emerged, and become an imperative for Australia after the pandemic. The reason? China.

“Of course, there is a layer of strategic convergence,” said Harsh Pant of the Observer Research Foundation. Australia has been in a bitter battle with China over trade in the past two and a half years. The bitterness began with Australia raising concerns over the Chinese telecom giant Huawei and introducing foreign interference laws to counter it. The spat turned into full-scale battle when in 2020 Australia asked for an investigation to the origins of the Covid-19 pandemic and China chose to flex its muscles. It slapped high tariffs on coal, barley, lobsters and wine imported from Australia. The impact has been devastating. The Chinese market for Aussie wines accounted for $1.3 billion before the tariffs; it fell to $12.4 million after, according to a Wine Australia report. Australia has taken China to the WTO for the tariffs.

The deepening of Australia’s military engagement with India, too, points to how determined Australia is to move away from China. This year, the Malabar exercise―so far held without the Aussies―will be hosted by them.

That the Australians were willing to accept the ECTA, which has kept out their biggest exports like diary and walnuts, shows how desperately they want to move away from China. “The perception is that the deal is in favour of India,” said Pant. “It points to how Australia is looking at geopolitical considerations. For India, it will be time to step up.”

The signing of the agreement is crucial for India, too. It broke the jinx and has sent signals to the rest of the world that there is a lot to be gained. But more importantly, there is also the message that was wrapped by in the 50-point joint statement by the two leaders―very much a vision for the relationship.

But there are challenges ahead. “There is still work to be done,” said Suri. India is hoping that more than trade, there will be Australian investment in India. “The superannuation schemes in Australia are conservative,” he said. “There is a push-and-pull factor to deepen our engagement, we will have to do a decent marketing job.”