Article

By: Mike Moignard, Austrade Senior Trade Commissioner, South Asia
Date: 1 November 2006

Merchandise exports to India reached almost $7 billion in 2005, making India our 6th most important merchandise export market, and simultaneously handing the world’s largest democracy the title of Australia’s fastest growing market amongst our top 30 export destinations over the past five years.

Major exports to date have been dominated by primary sector commodities. Australia’s coal and wool is critically needed by India’s manufacturing and textile industries, and is literally feeding the fires and filling the looms of the sub-continent’s burgeoning manufacturing industry.

Australian capability, particularly in the mining and resources sector, enjoys a strong reputation in India. The Indian government, which owns and controls mining in India, has invited Australia to be the partner country at the 8th International Mining and Machinery Exhibition (IMME 06) to be held in November this year, and at least 50 Australian companies will be represented at the show.

And as India continues to rapidly grow and sustain ongoing change, the composition of Australia’s export trade to India is also undergoing a continual process of diversification.

Australian companies are demonstrating excellence and technological proficiency in supplying a range of new goods and services, particularly in the ICT, telecommunications, financial and health sectors.

Australia is now also beginning to attain recognition as a quality source of sophisticated manufactures. Exports of elaborately transformed manufactures (ETMs) showed a substantial increase from A$123 million in 1996-97 to A$602 million in 2002-03.

The role of Australian services exports in fostering enhanced trade links is as also increasing. Australia exported $852 million worth of services to India in 2004-05, an increase of 43% over 2003-04, and new prospects continue to emerge in sectors such as ICT, biotechnology, education, tourism, health, film and insurance.

As part of this climate of change, the Indian economy is marked by growth in areas that didn’t feature on Australia’s business radar only a few short years ago. While India's dynamic ICT industry is globally renown (McKinsey and Co predict it will be worth $US 77 billion by 2008), the financial services, education services, retail, processed food and wine, consumer products, interior design and lifestyle goods sectors are likewise experiencing rapid growth and quick fire change, offering new areas of growing demand that Australia is well-positioned to supply.

According to World Bank development indicators, India’s services sector achieved an average growth rate of 7.9%  pa in 1990-2001, beating the global rate of 3.1% . The services sector currently accounts for 52.4%  of total GDP, with growth reaching 8.9%  in 2004-05 – largely attributable to the introduction of economic reforms and rising income levels.

The three fastest growing services sectors in India currently attracting the most significant FDI inflows and generating the greatest employment are business services (financial and telecom), professional services (IT related) and tourism, with other lucrative sectors including entertainment, health services, and education.

The potential for Australian exporters to benefit from the intensifying activity of the Indian services economy has increased since India became a signatory to the General Agreement on trade in services (GATS) – marking an irreversible commitment to liberalisation in trade in services.

Greater openness in services trade is resulting in new opportunities for Australian services exporters, with two areas of increasing promise being education and tourism. Supported by a rise in direct and code-share flights to Australia from Mumbai and Delhi, the increasing number of students and tourists to Australia will find the opportunity to travel much easier.

In retail, India’s 241 million strong middle class is enjoying an increase in disposable incomes, resulting in explosive sector growth and diversification of the consumer palette. Not limited by the burdens of a ‘one-child’ policy like China, more than 50%  of Indians are less than 25 years of age, and this youthful demographic is driving demand for new categories of products such as fashion, consumer electronics, and travel and leisure.

This retail revolution is being complemented by expanding urbanisation. More than 200 malls are planned for construction in the next 18 months alone – making India home to the fastest growing mall development in the world. Organised retail, which accounts only for 3% (US$7 billion) of the total retail sector valued at US$230 billion, is expected to grow to US$30 billion by 2010 offering unprecedented opportunities for Australian suppliers willing to introduce their business capability to this mix of dynamic growth. 

In a country with more than a billion people, Austrade can help you find a definition of market that makes sense and suits your business objectives. Austrade has offices in New Delhi, Mumbai, and Chennai, as well as representation in Kolkata, Hyderabad and Bangalore.

Austrade is now focusing on a number of sectors in addition to consumer retail and services such as agribusiness, food and beverage, infrastructure, mining and mining related services – each with its own targeted business program designed to increase awareness of Australian industry capability in India, and capture new export opportunities for Australian companies.

For more information on breaking opportunities in India contact your local Austrade office.