As elections loom, India is in free trade agreement mode. Hot on the heels of announcing the signing of a “landmark” deal with a group of non-EU European countries, India has also been deep in negotiations with the United Kingdom. Those talks concluded last week, failing to clinch a long-awaited deal – a sad outcome for UK trade negotiators who have now conducted 14 rounds of trade talks with New Delhi, but something that has Canberra trade officials breathing a sigh of relief, seeing reprieve and more opportunity for Australia to gain a strong market foothold.
This is a turnaround for India from its previous position of protectionism, particularly when it walked away from the Regional Comprehensive Economic Partnership in 2019. After signing trade deals with the United Arab Emirates and Australia, this one is the first for Europe. India’s government now wants to hit US$1 trillion in annual exports by 2030, so recognises it needs to open up its own market for that to happen.
Moves to enter the Indian market by Australian companies have been cautious, stymied by factors such as a general lack of India literacy and the ability to scale fast.
Next month marks two years since Australia signed its long-sought free trade agreement with India. Known as ECTA (Australia–India Economic Cooperation and Trade Agreement), it allowed for tariff reduction on a wide range of Australian goods exports, including wool, oats, produce, wine, minerals and resources, cosmetics and railway equipment. Services under the agreement include higher education, various business services and construction.
Since then, moves to enter the Indian market by Australian companies have been cautious, stymied by factors such as a general lack of India literacy and the ability to scale fast.
Major organisations including ANZ, Wesfarmers and Telstra are in India, as well as technology firms Acusensus, Rubicon Water and Atlassian.
Indian companies operating in Australia include online marketplace Cars24, rideshare app Ola, and a number of IT companies such as Infosys and Wipro.
Last fortnight’s deal with the European Free Trade Association (EFTA), which includes Iceland, Lichtenstein, Norway and Switzerland, involves US$100 billion worth of investments across a range of sectors in India, including manufacturing. It also offers more room for Indian services firms to enter their markets, such as in the audit and accounting, legal, IT and healthcare sectors.
The deal also includes a commitment by the EFTA to generate a million jobs in India over 15 years, which would go some way towards easing the persistent challenge of unemployment there. And importantly, it also allows for more relaxed visa requirements for Indians working in Europe.
When it comes to negotiations over the UK free trade agreement, visas for Indian workers in Britain have also been a key condition. This is something that more than likely has put UK Prime Minister Rishi Sunak in an unenviable bind in which he is forced to tread a path between the desire to gain agreement with New Delhi and accede to domestic concerns around migration, particularly strident in conservative quarters.
A few hundred years after the East India Company tapped the subcontinent for its goods and cheap labour, the UK government is now coming, cap in hand, to India seeking market access for its goods.
In fact, the atmosphere around migration is a tinder box, and is not expected to ease ahead of general elections later this year. But India–UK migration is apparently a sticking point that will not go away. Access to visas for highly skilled Indian professionals and for social security payments to be returned are, it is said, the most politically sensitive elements of the proposed deal.
However, the calling of India’s own general elections, which will take place between April and June, has put the trade talks on hold. It has also been said that India is holding out to be able to negotiate with a UK Labour government, which may be more amenable on the visa conditions.
For its part, Britain wants India to reduce or remove tariffs on alcohol – particularly Scotch whisky (a vital part of the Indian post-midday diet), dairy, automobiles, confectionery, produce and more. The United Kingdom also wants to be able to bid on projects in Indian states.
There is, admittedly, something rather poignant about this situation, though. A few hundred years after the East India Company tapped the subcontinent for its goods and cheap labour, the UK government is now coming, cap in hand, to India seeking market access for its goods. And two Indian men, both leaders of their respective countries, discussing how to get the best deal for Indians in Britain. Now that’s a reversal of colonialism if there ever was one.
The failure to reach a deal, though, is a boon for Australia, as it now has more time to gain a solid foothold into India. What Australia is best placed to deliver are high-value products, whether cosmetics or wine, clean energy or even, say, helicopters. What holds Australia back is a lack of skills, work force and India literacy. When more Australians start to understand India as a place beyond the headlines and cliches, the rewards will flow.
