Australia-India: Bilateral Trade Opportunities and Challenges

Introduction

Since independence in 1947, the Indian economy followed a protectionist, inward-looking policy with the objective of achieving self-sufficiency and import substitution through a five-year planning strategy of green (agriculture), white (dairy), and industrial (technology and manufacturing) revolution. After the financial crisis of the early 1990s, the Rao government’s ‘New Economic Policy’ reform package moved the country away from inward-looking restrictive trade policies to outward-looking policies and opened the Indian economy to international competition, deregulation, trade liberalisation, export promotion, privatisation and globalisation initiatives (Bhagwati, 1993; Chatterjee, Rae, & Ray, 2006; Medhekar, 2003).

The New Economic Policy reform package opened the economy to foreign direct investment (FDI), and public-private-partnerships (PPPs) for achieving Millennium Development Goals (MDGs) and economic growth (Ahluwalia & Little, 1998). India is a member of the World Trade Organisation (WTO), G-20 and General Agreement on Tariffs and Trade (GATT), like Australia. Further, the South Asian Association of Regional Cooperation (SAARC) is not functional due to the 1971 war that led to the creation of Bangladesh, cross-border skirmishes over Kashmir and distrust, and cancellation of SAARC meetings and bilateral economic, trade and cultural ties between the two countries. SAARC, which is the world’s largest organisation with 22 percent of the world’s population constituting eight countries, has not led to trade convergence, but more trade divergence between SAARC countries rather than to achieve positive economic outcomes for peace and prosperity of the region (Patra, 2016).

During 1947-80, it was difficult for Australia to establish any fruitful trade relationship with India, because India was not considered important for Australia, the international Kashmir issue, a tilt of Australia with Pakistan, and Australia-US strategic alliance and trade relationship with China (Gurry, 1993; Gurry, 2013). However, commencing in 2006 under then-Prime Minister John Howard, Australia–India bilateral strategic relationship improved significantly. In 2009. Prime Minister Rudd’s government progressed beyond cricket diplomacy and took the relationship to the next level of strategic and bilateral trade relationship (Bergenwall, 2016; Bhagwati, 1993; Gurry, 2012; Mayer & Jain, 2010; Mishra, 2012; Ranjan, 2016; Thakur & Sharma, 2018). Prime Minister Abbot and Morrison’s coalition government has also sought to strengthen bilateral trade relations with India- the sixth largest economy in the world and the single largest source of permanent migration to Australia (Asialink, 2019).

Australia and India have much in common given both were British colonies and are now part of the commonwealth group of nations. Besides, they share English as the official language of business, the rule of law and democratic leadership; however, with different cultural values (Gurry, 1993). Various bilateral trade initiatives such as mining and export of coal and particularly uranium, to harness nuclear energy required for India’s development, could not take place, and is still a challenge. This was due to the risk factor of mining uranium at all stages and to producing nuclear weapons by India; as India has not signed the Nuclear Non-Proliferation Treaty (NPT) (Brewster, 2010; Smith, 2010). However, the two-way bilateral trade in goods and services increased to $A 18 billion in 2014-15 and grew to $27.5 (27 percent) billion in 2017 (Department of Foreign Affairs and Trade {DFAT}, 2018a). Further, since the Modi government came to power in 2014, it’s foreign policy has been transformed from Look-East to Act-East towards South-East Asia, Japan and Australia to form bilateral trade, investment and defence security ties with the countries (Ganguly, 2017; Hall, 2015; Nguyen, 2017; ORF, 2019; Ranjan, 2016; Raghuramapatruni & Chary, 2017; Wojczewski, 2019).