Aus agri: developing relations in India

The ECTA with India is the last to be signed by Australia in the past two decades, often after years of negotiations. The FTA with New Zealand was signed in 1983 and since 2003 Australia has ratified around 16 FTAs, including with the United States, China, Japan and South Korea. Each subsequently saw significant benefits for certain agricultural exports, particularly beef.

For Australian agriculture, India offers a massive, scalable and unique market. With a population of 1.4 billion, an eclectic mix of cultures and religions, and an increasingly affluent middle class, the Indian market offers opportunities for a range of products.

Obviously, the market is not without its challenges either. The country’s infrastructure, particularly for reaching internal metropolitan markets, is different from what many Australian exporters may have experienced before, while the country’s bureaucratic process could also be potentially longer than Australia’s.

It is important to note that the prospect of India as the main export destination for Australian agricultural products would be an important step in diversifying the number of export markets and reducing concentration risk. Since a number of agricultural products have only a small number of major export destinations, this would reduce the risk of agricultural exports being hit hard if a problem affected a particular market.

Commodity Outlook

In terms of individual products, the exports that could initially benefit the most from this FTA include sheepmeat, wool, lentils, horticulture and wine.

For wool, the current 5% tariff will be reduced to zero by the end of this year. India currently purchases around 7% of Australia’s wool production, ranging from superfine wools to coarser wools. While China has long been the largest market for Australian wool, the potential for increased processing in markets such as India and across the sub-continent will continue to grow.

For sheepmeat producers, the Indian market has proven difficult to penetrate so far, due to a 30% import duty. As a result, Australia has exported only 111 tonnes of mutton to India over the past five years. With this tariff now set to be reduced to zero, Australian exporters will be able to explore new opportunities in the Indian market, particularly for the Muslim population.

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