Free-trade deal with India ‘a big step closer’, says Indian foreign minister

India’s top diplomat says there is a ‘tailwind’ behind negotiations for an Australia-India free-trade agreement.

Treasurer Josh Frydenberg. Picture: Gary Ramage

India’s top diplomat says there is a “tailwind” behind negotiations for an Australia-India free-trade agreement, declaring his country is determined to improve what it sees as an “underperforming” ­bilateral relationship.

“I have a real sense that we are progressing this time,” Indian External Affairs Minister Subrahmanyam Jaishankar told the Australian National University’s JG Crawford Oration on Monday. “There is a tailwind which we hope will get us past the post.”

His comments came as Josh Frydenberg said Australia’s relationship with India would be “critically important” to the nation’s future economic prosperity as ­exporters sought to diversify their markets away from China.

Dr Jaishankar said he took it as a sign of Australia’s seriousness in progressing the broader bilateral relationship that Foreign Affairs Minister Marise Payne and ­Defence Minister Peter Dutton would fly to India later this week – in the middle of the Covid pandemic – for “2+2” ministerial talks.

He said there was “a sense at our end that this is a very underperforming relationship”, but it was one that Indian Prime Minister Narendra Modi was determined to improve.

“It is a refrain I have heard specifically and regularly from my Prime Minister, which is ‘do more with Australia. Find a way of improving this relationship’,” Dr Jaishankar said.

Speaking earlier at the ANU Crawford Leadership Forum on Monday, the Treasurer urged businesses to confront the “new reality” of global strategic competition that has disrupted trade with China.

Mr Frydenberg said finding new export markets would play a key role in driving future economic growth, especially within the region, as he highlighted India as an economy that contained a “huge” and growing middle class.

“Our relationship with India is going to be critically important,” he said.

An Australia-India free-trade agreement had been seen as a near impossibility, with negotiations between the countries languishing for a decade. But significant headway has been made in recent months, with both countries committing in August to an “early harvest” agreement by December, paving the way for a comprehensive economic co-operation agreement.

The move followed a trip by former prime minister Tony ­Abbott to India to progress the agreement, and three meetings ­between the nations’ chief trade negotiators on how the agreement would be advanced.

University of Queensland chancellor Peter Varghese, a former secretary of the Department of Foreign Affairs and Trade, said “thinking about India in the context of diversifying trade markets is sensible”. “The scale of the Indian economy over the medium to long term means that Australia can build a much more substantial economic relationship,” Mr Varghese said.

The independent India Economic Strategy he wrote for the government in 2018 found that Australia should target a trebling of exports to the country by 2035.

“I think the increasing importance of India is certainly accurate,” he said. “My report concluded there was no other single market anywhere globally which has as much growth potential for Australia as India – although that’s coming off a fairly low base, and it’s nowhere near the level of exports to China.

“One of the key arguments I used in that report was the need to diversify our Australian export ­dependency: Japan and China alone account for well over 40 per cent of our total exports.”  But our former top diplomat said it was “a mistake to think of India as the next China”. “They are two very different countries, economies and societies. While India is the only Asian country that can match China in terms of sales, it’s still only a fifth of the size of the Chinese economy. It will take a long time for that gap to close.”

Trade Minister Dan Tehan said recently that getting the agreement over the line in the proposed timeframe would “require a serious commitment from both sides”.