Footings for stronger India-Australia ties have been set

India and Australia were part of the same supercontinent, the Gondwanaland, until both drifted apart during the Jurassic age. For a variety of reasons, almost till the beginning of this century,New Delhi and Canberra remained apart much after the original tectonic shifts had originally split them.

A historic deal

• Australia and India struck a trade deal after two decades of efforts.
• It is a watershed moment for bilateral relations.
• The India-Australia Economic Co-operation and Trade Agreement (IndAus ECTA) eliminates tariffs on more than 85% of Australian goods exports to India (valued at more than $12.6 billion a year).
• With a GDP expected to grow at 9% in 2021-22, India is the world’s fastest growing major economy.
• Growth opportunities for Australian businesses are larger in India than in any other market.
• Over the five years leading up to the pandemic, two-way trade and investment between Australia and India had doubled.
• Now, IndAus ECTA is expected to increase bilateral trade from AUD$36.7 billion to AUD$60 billion
• The deal extends to enhancing services exports and strengthening people-to-people links, including a quota for chefs and yoga teachers, post-study work visa of 2-4 years for Indian students on a reciprocal basis, mutual recognition of professional services and other licensed/regulated occupations, and work and holiday visa arrangements for young professionals. Strategic importance of ECTA is as important as its economic content.
• With the turbulence faced by both nations in the Indo-Pacific region, the convergence of economic and geopolitical risks is real.
• ECTA is a clear response to those changing dynamics that both countries face

Highlights of the agreement

• It would create 10 lakh additional jobs in the country over the next five years.
• Countries will be able to increase the resilience of supply chains, and contribute to the stability of the Indo-Pacific region
• It will facilitate work visas for two to four years for Indian students in Australia on a ‘reciprocal basis’.
• Tariffs will be eliminated on more than 85% of Australian goods exports to India , rising to almost 91% over 10 years.
• Australia, has agreed to amend its tax laws to resolve India’s long-standing complaint that its firms providing technical services in the country are taxed on their offshore income

A deal despite challenges

• Half of India’s arms imports come from Russia and some 70% of its military hardware is Russian-made.
• India needs military diversification now greater than ever.
• Australia is limited in its delivery on this front.
• And whilst India would no doubt like to rely less on Russia, the U.S. is not stepping up to supply India with its latest missiles.
• In the past, Canberra’s fierce response to India’s 1988 nuclear tests and the Indian media’s over-the-top reaction to attacks on Indian students in Melbourne in 2009-2010 had almost derailed ties.

Conclusion

• Hailing from opposite sides of power blocs during the Cold War, both nations have shared norms and democratic principles and support a rules-based order.
• While they will continue to face headwinds that create new geopolitical and economic uncertainties, the footings for a stronger relationship have been set.