(Bloomberg) — Australia is eyeing India’s burgeoning middle class to help offset the economic damage wrought to some of its major exports by the twin headwinds of Covid-19 and heavy restrictions imposed by its biggest trade partner, China.
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With a middle-to-high income population of about 85 million people, according to Pew Research — roughly three times Australia’s total population — it’s seen as a prime target for sectors from education, to wine and tourism, all of which were hit badly by the pandemic and worsening relations with China.
Bilateral trade is expected to more than double to around A$60 billion over the next five years, after a pact that cuts or eliminates tariffs on a number of goods and services, and gives greater recognition of professional qualifications, comes into place on Dec. 29. While that’s still just a sliver of Australia’s two-way trade of A$280 billion with China, India’s widely recognized as a huge piece of the country’s diversification puzzle.
Australia’s efforts are paying off, just as its relationship with China is also showing signs of thawing. Between April and October this year, India’s imports of Australian goods climbed to US$12.3 billion, up 48% from a year ago. The mood is buoyant and Ajay Sahai, director general, Federation of Indian Export Organisations expects to see a further boost in coming years.
“Coal, copper, aluminium, cobalt we can see a sizable jump in all of this. Wine imports too would go up,” Sahai said in an interview, referring to the potential benefits from the deal.
Australia, where the Indian diaspora represents about 3% of the population, established the Centre for Australia-India Relations in 2022 to promote policy dialog and administer scholarship and fellowship programs among other things. India and Australia are also part of a multi-year program to help Australian businesses compete in India and will this year host a leadership dialog, with Indian Prime Minister Narendra Modi likely in attendance.
Here are four sectors poised to benefit from stronger Australia-India ties:
Education
When international borders reopened earlier this year, Australia’s higher education sector faced the daunting task of rebuilding the lucrative international student market. The job was made more difficult by China’s insistence until recently on pursuing a Covid-zero strategy, which meant students from the mainland were largely unable to return to Australian campuses.
At the University of Sydney, 2022 marked the highest-ever international enrollments from outside China, Vice Chancellor Mark Scott said, with the surge driven by numbers from India. There was growth across all faculties and schools. After a recruitment trip to India in September, he’s hopeful of further gains in 2023.
At the end of October, 121,868 Indian students were enrolled in the country, down about 13,300 on 2019. By comparison, enrollments from China are nowhere close to their pre-pandemic highs.
Universities expect to see a further jump in demand from India as under the new trade agreement, Indian graduates from select streams will qualify for the right to stay in Australia for longer to work, as well as the promise of mutual recognition of education qualifications.
Tourism
Tourism is another sector in which Australia is anxious to entice India’s burgeoning middle class. Its efforts seem to be working, with the latest data in December showing India was the second-largest source country of visitors after New Zealand, replacing China in top five.
Earlier this year, Tourism Australia organized trips for a handful of Indian social media influencers to watch the ICC Men’s T20 Cricket World Cup in Melbourne in October. The push was part of a broader, global A$125 million campaign, a spokesperson for the tourism body said.
One of the influencers was Barkha Singh, whose video grooving on a popular Bollywood number with Australian food critic and TV presenter Matt Preston garnered 1.3 million views. Other posts from Singh included a helicopter ride at Rottnest Island, diving at the Great Barrier Reef and Instagram reels of the India versus Pakistan match.
Still, Indian holidaymakers are not as lucrative as Chinese visitors for Australian businesses as their spending power is still relatively feeble compared to China.
The tourism sector needs almost twice as many visitors from India than from China to make the same revenue, according to economists at Australia & New Zealand Banking Group.
Critical Minerals
India was Australia’s second largest export market for coal in 2020-21, according to government data. Australia’s coal trade with India vastly outstrips other exports in value and it is still growing.
But as the world moves away from fossil fuels, Australia shouldn’t trust its coal trade with India to remain strong, according to Raghbendra Jha, professor emeritus at the Australian National University’s Crawford School of Public Policy.
“Both India and Australia will be making very sharp and, right now, unpredictable changes in their energy mix,” he said.
Still, there are opportunities in the resources sector. Australia has 21 out of the 49 minerals that have been identified in India’s critical minerals strategy so there’s a “perfect marriage in their efforts to de-carbonize their economies,” said Lisa Singh, CEO of Melbourne-based Australia-India Institute and deputy chair of the Australian government’s Australia-India Council.
Wine Wins
In the 12 months through September 2022, Australia was India’s biggest source of wine, with A$16.2 million imports, an 81% gain on the year prior, according to government data.
Its budding wine market is projected to grow 8% a year to 2024, off a low base, as changing attitudes to alcohol have led to an increase in wine drinkers, said Austrade. The bilateral trade pact will slash tariffs on Australian wine, giving it a further boost.
The trade deal is also expected to improve access for other Australian sectors including pharmaceuticals, cosmetics, lentils, sheepmeat and horticulture exporters, said Trade Minister Don Farrell in a statement.
Still, while some thrive, other industries hit by China trade troubles are expected to miss out.
With a huge rural population, whose livelihoods depend on subsistence farming, Australian agricultural exports like barley are unlikely to find a home in India, says University of Sydney’s Patricia Ranald.
–With assistance from Shruti Srivastava.
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