The numbers behind India and Australia’s $100-billion trade target

The two countries are “negotiating a more comprehensive agreement on goods and services, which may also include movement of skilled and agricultural labourers to the continent”.

India and Australia signed an interim free trade agreement on April 2. The India-Australia Economic Cooperation and Trade Agreement “provides zero duty exports to 100% tariff lines from India to the Australian market, benefiting labour-intensive sectors besides providing greater access to services space through liberalised visa norms for students and professionals, including quota for Indian chefs and yoga teachers. Australia will be able to supply various raw materials and intermediaries at zero duty,” HT reported on April 7. The two

Union Minister for Commerce and Industry Piyush Goyal with Australia's Minister for Trade, Tourism and Investment Dan Tehan, (ANI)

How feasible is the $100 billion trade target?

Bilateral trade in goods between India and Australia grew at CAGR of 25.07% and 24.86% between 2000 to 2005 and 2005 to 2010. The next two five-year periods saw a contraction in the value of trade.

An HT calculation of the CAGR shows that the bilateral trade in goods has to grow by 22.41% to reach $100 billion by 2030, from $19.8 billion in 2022. Since this is significantly higher than past growth rates, it suggests that trade in services will have to do the heavy lifting if this target to be achieved even partially.

What are the major export and import goods in India-Australia trade?

Mineral fuels, mineral oils and distilled products formed the major chunk of India’s imports from Australia at 73.60% between April 2021 to Feb 2022, data from the commerce ministry shows. Industrial inputs such as inorganic chemicals, ores, slag, ash, aluminium, iron and steel together accounted for 9.71% of the total imports from Australia between April 2021 to Feb 2022.

In terms of India’s exports to Australia, mineral fuels, oils and their distilled products had the highest share at 28.12% between April 2021 to Feb 2022. Pharmaceutical products had the second highest share at 7.85% between April 2021 to Feb 2022. Other items such as nuclear reactors, articles of iron and steel, electrical machinery, parts and accessories together constituted 16.34% in total exports between April 2021 to Feb 2022.

What are India and Australia’s strong points in trade?

India is a major exporter of consumer goods and intermediate goods to Australia, data from World Integrated Trade Solutions (WITS) shows; WITS classifies goods into four categories based on their stages in the production process. Their shares in total exports to Australia was 61.96% and 18.51% in 2019, respectively. But, for India, Australia is a small export market for these goods in comparison to global markets. To be sure, in 2019, India exported around $146 billion and $101 billion worth of consumer and intermediate goods to the world, of which 1.26% and 0.55%, respectively, were sold in Australia.

Australia is a major exporter of raw materials to India, whose share in total exports to India was 84.01% in 2019. India is a significant export market for primary commodities from Australia. In 2019, Australia exported $152 billion worth of raw materials to the world, of which 5.4% were sold in India.