Why the India-Aus FTA is great for business

The new trade agreement between India and Australia looms as a big opportunity for businesses in both countries.

This deal - officially the Australia-India Economic Cooperation and Trade Agreement, or AIECTA - has been a long time coming. Negotiations have gone on for almost a decade, if not more - all the while as trade between the two nations has risen to $US27 billion.

Since the signing in early April, excitement in the business community on both sides has been palpable. The two countries have been busy talking directly to business communities and laying out the growing opportunity.

India’s Ministry of Commerce says bilateral trade could grow by 60 per cent over the next five years thanks to the deal. ANZ Research has forecast it to hit $US52 billion by 2030.

An elimination of tariffs on both sides, increased access for services and a focus on human capital are all likely to play a part in that growth.

At ANZ, it’s clear the agreement will open many exciting doors for business, across trade and capital investment.

For those considering trade between the nations, there’s never been a better time to start. For those already involved, the preferential tariff treatment will make their business more lucrative, while margins will strengthen as costs decline and output grows.

Excitement

It’s an exciting time for the two nations. India is currently Australia’s seventh-largest trading partner while for India, the trade relationship is forecast to grow significantly in size and scope

At ANZ, we’ve spent time talking with our customers in the aftermath of the agreement, and the overwhelming feeling from those talks is one of optimism. 

Our technology clients are pleased with changes that remove longstanding tax challenges. Our energy clients are looking forward to the prospects of shifting import and export expectations.  The excitement is growing as further clarity is emerges, and they are beginning to mull their next steps.

Australian agribusiness should benefit from increased access to India’s large and growing population – particularly in lamb, wool, and seafood.

According to ANZ’s April Commodity Insights report, Australia has exported just 111 tonnes of sheep meat to India since 2017, due largely to a 30 per cent import tariff. Under AIECTA, that barrier is removed.

Services firms on both sides of the deal loom as key beneficiaries. There are several subsectors that will see preferential tariff treatment.

Australia has offered India most-favoured-nation status in 120 sub-sectors, across IT, health, and education. India has offered improved access in around 103 sub-sectors and MFN status in 31 - including tourism and education.

As a result, several Australian universities – a sector which was hurt more than many by COVID-related movement restrictions - are already taking steps to attract students back to Australia from India, a crucial market for the sector. The AIECTA partners well with recent changes to the length of work permits international students can secure in Australia.

When combined with the trade deal, the result is increased foreign exchange flows between the nations once these students complete their education and can remit surplus back home to their families. Further to that, many of these students may end up making Australia home, investing in a business or property.

Expertise

At ANZ, we are fortunate to be one of the largest Australian corporate investors in India, so our expertise in the market is almost unmatched.

As a bank, we’re ready to support the trade and capital flows which will grow from this agreement – and we are conscious we have an important role to play in supporting our customers and partners through the new landscape. 

We’re looking forward to helping everyone involved make the most of this opportunity – now and well into the future.

Rufus Pinto is ANZ Country Head, India