Turnbull commissions India inquiry as FTA talks bog down

18 Apr 2017

Austyralian Financial Review 9 April 2017

By Phillip Coorey


New Delhi: Prime Minister Malcolm Turnbull has commissioned a top-level inquiry into the economic potential of engaging with India amid growing concerns that efforts to tap into the rapidly developing regional power have stagnated.

Mr Turnbull, who flew into New Delhi on Sunday for a three-day visit, is expected to announce while there an independent India Economic Strategy to examine how to better open doors to Australian business, better understand India's growth trajectory to 2035 and identify practical ways to grow trade and investment.

Sources have told The Australian Financial Review that cabinet has agreed the process will be led by former head of the Department of Foreign Affairs and Trade, and veteran diplomat Peter Varghese. It will run in parallel with ongoing negotiations to forge a free trade agreement with India, a country which Mr Turnbull said last week compares with China as "a land of immense opportunity for Australia".

But FTA talks have been stalled since before Christmas with each side conducting a "stocktake" to determine where they are in terms of negotiations. Sources have said the talks are principally bogged down over India's demand for labour mobility – or freer access to Australia for their workers – and Australia's demand for greater agricultural access.

Demands made by China for labour mobility proved the toughest hurdle in the China-Australia FTA and eroded domestic political support for that deal.

The Turnbull government is mindful of a domestic political backlash should it allow easier access for Indian workers and is playing hard ball.

At the same time, India's agriculture industry is both splintered and heavily protected and the Indians are pushing back at Australia's efforts to secure greater access.

India is the world's fastest growing major economy and could be the world's third biggest economy within 15 years. Two-way trade between the countries was more than $19 billion in 2015-16.

"There is scope for significant growth," Mr Turnbull said.

"Two-way trade is growing, and approaching $20 billion, but that's far too low and there's so much more we can do. This will be a key focus of my visit."

Getting the FTA back on track is expected to feature in talks between Mr Turnbull and his Indian counterpart, Narendra Modi. There is criticism within trade circles that Australia has dropped the ball on India because it has been focused on sealing a deal with Indonesia. There has been a sharp decline in ministerial visits to India over the past 18 months and the last prime ministerial visit was Tony Abbott in 2014.

​Also high on the Prime Minister's agenda will be energy – primarily the proposed Adani Carmichael coal mine in Queensland's Galilee Basin, as well as reassurances that Australia will also be a reliable supplier of gas and uranium.

Education will be the other key feature and Mr Turnbull's trip will coincide with a trip by Education Minister Simon Birmingham and a large delegation of university vice-chancellors and officials.

Australia's education exports to India are worth $2.3 billion a year with more than 60,000 Indian students studying in Australia last year. Increasing the number of students, especially those doing post-graduate degrees, as well as increasing the provision of vocational education and skills training will be on the agenda.

Writing in Monday's Financial Review, Group of Eight Australia chief executive Vicki Thomson said: "Australia's existing relationship with India is too little recognised in Australia.

"It gets lost as China and Europe take prime media and public focus. Yet our economies are highly complementary.

"It seems that if we can put Test cricket to one side, our existing relationship with India works well. But as our former trade minister Andrew Robb has stated, this is not the time to coast.

"Unless we engage more and better, India's transformative plans will see us left behind with our small population of just 24 million compared with India's 1.3 billion ... and with India's burgeoning middle-class expecting first world services and capabilities from the changing economy."

The Go8's focus in India this week will be on attracting more PhD students to Australian universities.

"It would be a great mistake for anyone to consider that university involvement in India is some paternalistic research and teaching support to a less mature member of the Commonwealth," she said.

"India has much to offer Australia as a partner in what we are about to develop."

​Before leaving for India, Mr Turnbull told a business breakfast in Port Moresby that Australia and Papua New Guinea needed to strengthen their trade and investment relationship.

He also urged PNG to diversify its commodities-based economy, focusing on science and technological innovation and he offered Australia's support in this area.