Australia's trade with India has gone down in recent months while Australia's export with China has risen by 46 per cent.
The latest report by the Australia Bureau of Statistics (ABS) reveals India's share of Australia's exports fell below 2 per cent in June, the lowest since 2003.
Highlights:
- India's share of Australia's export was only 2 per cent in June.
- Australia's direct investment in India remains 0.2 per cent of the total FDI overseas.
- India is making an effort to check its trade deficit.
David Uren, a non-resident fellow at the United States Studies Centre at the University of Sydney says the economic underside of India-Australia relations remains underdeveloped despite the recent efforts by two countries.
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He says, "Australia's trade with India has weakened since over the last two years and over the last year in particular. The latest day ABS numbers also showed the Australian investment in India has remained pretty weak."
So at a time when the Australian and Indian governments are attempting to develop a close relationship, I think for geopolitical reasons as much as anything else, the economic side of the relationship remains pretty underdeveloped.
Although many believe that recent slump in the trade figures is due to a global pandemic, David Uren is of the view that India's strategy of becoming 'self-reliant' has played a significant role.
He says COVID is a contributor to its, but India's decision to reduce coal import is one of the main reasons why Australian trade with India has been so weak.
"About 70% of Australia's exports to India in the last year which we have full data was coal and India has a strategy now of becoming self-sufficient in coal by 2023-24 which seem one of the main reasons why Australian trade with India has been so weak is because of cutbacks in Indian coal purchases," he said.
David Uren Source: ussc.edu.au/
What struck Mr Uren of the latest trade numbers is the fact that China had reached a phenomenal 46 per cent share of Australia's exports in June.
India, in the same period, slid below 2 per cent, which is the lowest level since 2003.
"If you go back ten years, India was accounting for about 8 per cent of Australians exports. So less than two is really very weak. You can't draw too firm a conclusion from one-month trade numbers, but over the full year I think India's share is not more than 3 per cent," says Mr Uren.
He believes the two countries share a desire for a closer relationship, but the policies need to make sense to businesses on the ground.
He says, "Both countries are concerned by China's growth and intentions. So I think there is a desire at the political level to build a closer relationship. Still, ultimately, trade and commerce, these are decisions that are made by businesses that can be conditioned by governments."
"I would suggest that the Modi government's 'Self-reliant India' programme is one that is likely to seek to constrain imports. I know the Modi government says it's not an isolationist policy, but I think that it will have that effect."
Experts have earlier suggested Australia needs to reduce its dependence on China and that India may to a certain extent be able to replace China as Australia’s economic partner.
