Recent years have seen remarkable growth in the trading relationship between India and Australia, which is evidenced by the growth in two-way trade from $5.1 billion in 2003 to $15.2 billion in 2013.
Negotiations to conclude a Comprehensive Economic Cooperation Agreement (FTA) between Australia and India were first launched in May 2011 and there have been five rounds of negotiations, the most recent of which was held in May 2013. Indian Prime Minister Narendra Modi made clear his intentions during the Brisbane G20 conference and earlier this year that he wanted to finalise an FTA with Australia by the end of 2015.
Doing business in India has always meant dealing with its Byzantine bureaucracy, which has created a major disincentive for foreign companies to invest in India. Prime Minister Modi has made it clear that this is one area that he plans to address, which he intends to achieve by implementing a policy environment that is predictable, transparent and fair.
Principal Indian agricultural exports to Australia include tea, rice, cashew nuts and tobacco. Australia’s principal agricultural exports to India include wool (for which Australia is India’s largest supplier), pulses (particularly chickpeas), almonds, paper and paperboard, and in previous years, wheat.
While still small, wine exports from Australia to India are increasing, and accounted for 15% of India’s total wine imports in 2008.
There are high levels of complementarity in agricultural trade between the two countries. These include the ability of Australia to meet domestic shortfalls in Indian production, agri-trade opportunities and the opportunity to trade seasonal items on a counter‑seasonal basis in both directions (which would provide consumers with access to high quality fruit and vegetables at a lower price year round).
Mutually advantageous opportunities in the agricultural trade relationship are only likely to grow. Due to the changing structure of demand, India is likely to become a more regular importer of certain food items, some of which Australia will be well placed to provide, such as high-value dairy products.
In addition, as India’s food processing sector continues to expand and looks for export opportunities, Australian inputs (potentially facilitated under an FTA) could become an increasingly important part of India’s supply chain.
There are limits, however, to the extent to which Australia’s agricultural goods exports to India could increase. Australia faces substantial capacity constraints due to the limited availability of arable land and water as well as having existing agricultural export markets that it will need to continue to service. Furthermore, Australian agricultural exports are also not likely to compete with subsistence farmers in India, and are more likely to target distinct niche markets in urban high population centres.
In light of the complementary nature of Indian and Australian agricultural exports, trade liberalisation through an FTA which liberalised tariff and non-tariff barriers would bring significant benefits to both countries. Such benefits would be commensurate with the level of liberalisation undertaken.
India’s agriculture sector has seen less growth than other parts of the Indian economy. Logistical impediments, such as limited supply of cold storage and weaknesses in transport infrastructure have contributed to high levels of wastage and loss.
As a major food producer and exporter, Australia has developed expertise in a range of agricultural and agri-business services, some of which are already being provided in India. In particular, Australian agro‑services companies have considerable strength in logistics including storage, transport and cold chain management.
Australian firms also deliver services that focus on improving yields and productivity of farmers through information technology and animal and plant based biotechnologies, including in pasture and improved animal and plant genetics. Australian services expertise could therefore help enhance the export capabilities of the Indian agriculture and food industries in a range of areas.
SNAPSHOT OF INDIAN AGRICULTURAL SECTOR
- At 157.35 million hectares, India holds the second largest agricultural land globally
- The sector accounts for 18% per cent of India’s GDP
- India is the largest producer of pulses, tea, cashew and jute, and the second largest producer of wheat, rice, fruits and vegetables, cotton and oilseeds
- Agriculture is the primary source of livelihood for 58% of the country’s population
- Total food grains production in India reached an all‑time high of 259 million tonnes (MT) in FY13
- The country is among the 10 leading exporters of agricultural products in the world, with total agricultural exports expanding at a compound annual growth rate of 22.3% to US$42.37 billion over FY07-13
- India is the second largest producer of sugar in the world and the government has aimed to increase exports from 1.3 MT in 2013 to an average of 2 MT in 2014/5
- Spice exports from India are expected to reach US$3 billion by 2016/7
- India is the largest producer of milk since 1998 and accounts for about 17% of the world’s milk production
- All the 15 major climates are found in India and the country also possesses 45 of the 60 soil types in the world