SYDNEY – 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.

With a middle-to-high income population of about 85 million people, according to Pew Research – roughly three times Australia’s total population – India is seen as a prime target for sectors from education and minerals to tourism and wine, 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 (S$54 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 is still just a sliver of Australia’s two-way trade of A$280 billion with China, India is widely recognised 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 (S$166 billion), up 48 per cent from a year ago.

The mood is buoyant and Dr Ajay Sahai, director-general of the 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,” Dr Sahai said in an interview, referring to the potential benefits from the deal. 

Australia, where the Indian diaspora represents about 3 per cent of the population, established the Centre for Australia-India Relations in 2022 to promote policy dialogue and administer scholarship and fellowship programmes, among other things.

India and Australia are also part of a multi-year programme to help Australian businesses compete in India and will this year host a leadership dialogue, 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 in early 2022, 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 enrolments from outside China, said 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 is hopeful of further gains in 2023.

At the end of October, 121,868 Indian students were enrolled in the country, a decrease of about 13,300 from 2019. By comparison, enrolments 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 that India was the second-largest source country of visitors after New Zealand, replacing China in the top five list. 

Earlier this year, Tourism Australia organised 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, said a spokesman for the tourism body. 

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 and 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 should not trust its coal trade with India to remain strong, according to Dr 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 is a “perfect marriage in their efforts to de-carbonise their economies,” said Ms Lisa Singh, chief executive of Melbourne-based Australia-India Institute and deputy chairman 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 per cent gain on the year prior, according to government data. 

India’s budding wine market is projected to grow 8 per cent a year to 2024, off a low base, as changing attitudes to alcohol have led to an increase in wine drinkers, said government agency 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, sheep meat and horticulture exporters, said Trade Minister Don Farrell. BLOOMBERG