The latest report by the Australia Bureau of Statistics shows that India’s share of Australia’s exports fell below 2 per cent in June, the lowest in 17 years.
Highlights:
- India's share in Australian export has fallen below 2 per cent in June.
- As Australian export partner, India slipped to the seventh rank from fourth.
- India has announced a strategy of 'self-reliance' to check its trade deficit with other countries.
According to the David Uren, a non-resident fellow with the United States Studies Centre at the University of Sydney, in the year to June, India has fallen to 7th from 4th among Australian export partners. The US, the UK and Taiwan have overtaken India, which signed a Comprehensive Economic Agreement with Australia after nine years of negotiations, in June this year.
The two countries have shown great enthusiasm in recent years on economic and strategic fronts. In November 2018, Australia formally endorsed the independent India Economic Strategy, led by former diplomat Peter Varghese. The strategy laid down a path to lift India into Australia’s top three export markets by 2035.
Australia's Prime Minister Scott Morrison and India's Prime Minister Narendra Modi (file pic) Source: (AAP Image/Mick Tsikas)
However, recent figures paint a different picture. Many experts have said in the recent past that Australia needs to reduce its dependence on China and India has a natural advantage to replace China as Australia’s economic partner.
Although many experts believe the recent slump is due to the COVID-19 pandemic, which has affected the global trade across industries.
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Economist Dr Vinod Mishra of Monash University says, ”Global trade has gone down due to pandemic and a slump between India-Australia trade is obvious. However, the latest figures show an increase in trade with China, which is quite significant.”
Natasha Jha Bhaskar, the General Manager of Newland Global Group, says COVID has affected buying sentiments, demand is largely restricted towards the essential items leading to the contraction of demand in the domestic economy.
Another reason Natasha believes is India’s decreasing coal imports.
China's northern Dalian port has banned imports of Australian coal amid simmering tensions. (AAP) Source: AAP
She says, “Australia’s major exports to India include coal and education-related travel. India’s coal imports dropped by 20 per cent in June this year.
“Coal India Ltd., which accounts for over 80 per cent of the domestic fuel output, has been mandated by the government to replace at least 100 million tonnes of imports with domestically-produced coal in the ongoing fiscal, to target thermal coal import substitution, particularly when huge coal-stock inventory is available.”
However, David Uren relates the slump to the Indian government’s ‘self-reliant India’ strategy.
In May this year, Indian Prime Minister Narendra Modi announced a new program, dubbed “Atmanirbhar Bharat Abhiyan” (Self-reliant India Scheme) to enable India to become more self-reliant.
David Uren thinks this is the main reason for the slump in sales to India.
Indian Prime Minister Narendra Modi. Source: AAP
“While the pandemic has depressed many export markets, the main reason for the slump in sales to India is its government’s nationalist ‘self-reliant India’ economic strategy which includes a target of eliminating coal imports by 2023–24. Coal accounts for around 70 per cent of Australia’s exports to India,” writes Mr Uren in his article published on The Strategist.
Natasha Jha Bhaskar agrees that India is making an effort to check its trade deficit.
There is a conscious attempt by the Government of India to check its trade deficit with countries. Indian companies have been submitting proposals to reduce import dependence on countries.
However, it is not just the trade that has taken a downturn. Australia’s direct investment in India is also minimal compared to other countries. It is only 0.2 per cent of the total FDI overseas.
Natasha Jha Bhaskar opines there needs to be a fundamental shift, in how Australian businesses understand India, and if the diversity of the Indian marketplace is misunderstood as “Difficult and Complex”.
“Much of the narrative on India is very antiquated, reflecting the sheer incapacity of businesses to acknowledge the strides New India has made, a slew of reforms implemented across various sectors to encourage investment, offering incentives across sectors for manufacturing companies to set up, including subsidised land prices, attractive interest rates on loans, reduced tariffs on the electric power supply, tax concessions, etc.,” says Ms Jha Bhaskar.
Trade, Tourism and Investment Minister Simon Birmingham is leading a delegation of over 100 Australian businesses and organisations to India. Source: Supplied
Vinod Mishra, on the other hand, emphasises the need for India to enable its economy to absorb the investment.
“Red-tapism is always a road blocker. A one-stop-shop should be available to foreign investors. India still needs to up its game in that area. Institutional reforms take time, and China has done that over a long period. It will take some time for India to reach that stage.”
