Aussie exports, get it India

The Detail

Australia and India have signed off on a trade agreement which will cut tariffs on a range of Australian export products providing opportunities to expand the trade for items such as coal, pulses, sheep & goat meat, wool, fruit & nuts, wine and minerals. Analysis of the export flow from Australia to India on a value basis over the last few years highlights that the trade is dominated by fuel items at nearly 70% of the total Australian export value for products sent to India.

The second largest trade category for Aussie exports to India is vegetable products at around 8% of the total trade value. Much of this vegetable trade consists of pulses, such as lentils, and nuts. However, there have been some recent seasons (2015, 2016 & 2017) where India imported between $US100 -$US400 million worth of Australian wheat.

A breakdown of export product categories for the 2020 trade season highlights that the fuel component of trade is dominated by coal briquettes, accounting for a little over 80% of the trade during the 2020 season. Indeed, over recent years coal briquettes have accounted for 60-80% of the total export trade from Australia.

Interestingly, aluminium oxide features regularly in the chemical trade category. Until recently Australia was exporting aluminium oxide to Russia, but recent sanctions have put a halt to that trade. As our earlier analysis on Russian sanctions outlined the aluminium oxide trade from Australia to Russia dominates those flows with around 70% of Australian exports to Russia each year consisting of aluminium oxide, when measured on a value of trade basis. In terms of Australia’s overall aluminium oxide export flows usually less than 10% heads to Russia in any given year, but improving market access to India as part of these new trade negotiations may give opportunities to expand the aluminium oxide trade.

In terms of agricultural products, Australian wool is a regular product in the top 10 trade items to India along with dried legumes. The trade deal will provide further opportunity to expand our presence in India for these products and it will also open up the door to a huge market for Australian sheep and goat meat, fruit and wine export items.

At this stage, dairy products and chickpeas have been excluded from the trade deal but the Australian government said it looked forward to the trade deal expanding in the coming years and may encompass dairy and chickpeas at a later stage. Similarly, Australian beef was not included on the trade agenda. Certainly, with a large Hindu population beef consumption is relatively small in India. However, there are Christian Indian citizens within parts of India and a 2011 census noted 2.3% of the population was Christian. Based on the 2020 population of 1.38 billion this puts a potential beef eating Indian community of nearly 32 million.

An assessment of the trade flows coming the other way highlights that imports of Indian products into Australia is also dominated by the fuels category, with around a quarter of the trade value comprised of fuels. Refined petroleum is the dominant fuel item imported into Australia from India, in 2020 nearly 25% of the trade was this fuel type alone.

Textile and clothing products also feature heavily at around 13% of total Indian imports into Australia. There are a vast array of textile and clothing items imported from India by Australian consumers. The 2020 season highlighted that house linens, womens suits and hand woven rugs dominated the textile and clothing trade category.

Chemical products and stone/glass items also feature significantly in the trade flows into Australia, consisting of 12% and 9% of the import flows from India, respectively. Packaged medicines and pesticides account for much of the chemical items imported. Meanwhile, diamonds and jewellery items encompass much of the stone/glass trade category.

Improved market access to India is a fabulous result for the Australian producer. The chance that ongoing trade negotiations can lead to a free trade deal over time that encompasses items such as dairy, chickpeas and beef is also a tantalising prospect.

The team at EP3 have been quite vocal in recent years outlining the strong supply/demand fundamentals facing the Australian sheep & goat meat producer over the next decade given that Australian and Kiwi producers dominate the global export supply and demand continues to grow for sheep/goat meat from many export destinations. A deal with India encouraging growth in exports for sheep and goat meat products further adds to the already strong outlook for this sector.

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