India, the export prize ripe for business and investors
Foreign policy experts at the Australia-India Roundtable, as the annual meeting is known, said ties between the two Indian Ocean powers were "poised at an historic moment" amid new levels of mutual trust. A top Indian strategic analyst said there was real momentum in India-Australia relationship for "the first time since the independence of India" more than 60 years ago.
The Labor government's decision to drop its ban on uranium exports to India has made a big difference. The broad response to violence and other problems facing Indian students in Australia has also gone down well in Delhi.
But if political ties are on the up, the economic relationship between Australia and India seems to have lost some of its zing. A few years ago our trade with India was growing even more quickly than trade with China. But things have changed. New government figures show Australia's merchandise exports to India fell by 17 per cent last financial year. Two-way merchandise trade was down 12.5 per cent. Back in 2008-09 India surged ahead of South Korea as Australia's third biggest export market but has now dropped back to a distant fourth.
The details of Australian trade with India expose some considerable shortcomings in the economic relationship. Firstly, there is a huge trade imbalance - last year Australia exported $15 billion worth of goods and services to India but imported just $3.2 billion from India. Australia accounts for just 0.7 per cent of India's exports making us its 33rd most important export market.
In other words, when it comes to trade dollars, India is far more important to us than we are to them. Secondly, the trade relationship is very narrowly based. Just two Australian commodities - coal and gold - made up half of all trade between the two nations last financial year.
The trade imbalance is reversed when it comes to investment. The involvement of Indian firms in several big mining projects, especially in Queensland, lifted total Indian investment in Australia to $11 billion last financial year, according to the Department of Foreign Affairs and Trade. There is recognition in India that Australia has a major role to play in meeting its enormous demand for energy. A recent report by Melbourne University's Australia-India Institute, Beyond the Lost Decade, said: "Queensland has emerged as a key location for India's energy security needs."
However, Australian investments in India are puny by comparison, totalling just $4.3 billion last year. That's a fraction of Australian investments in its other big Asian trading partners - China (total investments of $17 billion), Japan ($35 billion) and South Korea ($13 billion). One reason for this is restrictions on investments in many sectors of the Indian economy. The Energy Minister, Martin Ferguson, addressing the Australia-India Roundtable this month, was blunt - there are "frustrations in the relationship" and the plans of some Australian companies to make big investments in the Indian mining sector are being thwarted. "This is a new phase in our engagement and energy security has jumped up as one of the priority issues," he said.
"Australia is a strong economy because we've welcomed foreign investment. We've got companies that are frustrated in their desire to invest in India so we've all got our challenges."
Big mining companies such as Rio Tinto (which has a diamond and an iron ore project in India) and BHP Billiton have been waiting more than a decade for the mining sector to be opened up.
Even so, the story of Australia's investments in India is far from impressive. Some of our biggest companies have made promising investments in India only to retreat at great cost to them, and to Australia's reputation as an investor. Telstra was among the first telecom companies to win mobile service licences in India in collaboration with a local company. Modi-Telstra, as the joint venture was known, was the first company in India to provide mobile telephony services. But Telstra sold its stake and left India not long before reforms freed up the mobile market. That decision meant Telstra missed out on India's mobile phone boom - the country now has more than 800 million mobile phone subscribers, having added more than 500 million in the past five years alone.
ANZ has a similar story. It purchased India's iconic Grindlays Bank in 1984 and with it a valuable stake in the Indian financial sector. But in 2000 ANZ sold its Grindlays subsidiary to Standard Chartered in a move that was interpreted by many Indians as a vote of no-confidence in the country's economic prospects. The Indian banking sector has subsequently experienced strong growth and Standard Chartered is now considered one of India's most successful foreign banks.
The Beyond the Lost Decade report says the "departure of Telstra and ANZ in quick succession left many business analysts in India with the impression Australian companies were only in it for the short haul".
Patterns of foreign investment can be a telling indicator. While trade is a relatively simple relationship that does not require a lot from either party, investment is a much more enduring relationship that requires a high level of trust.
Australians are still much more comfortable investing in the US and Europe than Asia. Even though India is a bigger export market for Australia than the US, the value of Australian investments in America is 100 times the value of investments in India.
The Australian government has managed to put political relations on a much firmer footing. Now businesses and investors need to step up.
Frequently Asked Questions about this Article…
Political ties are upbeat — officials describe the relationship as poised at a historic moment after steps such as lifting the uranium export ban and better responses to issues affecting Indian students. For investors this matters because stronger political trust can unlock trade and investment opportunities, but the economic relationship still has structural weaknesses that investors should understand before committing capital.
Yes — there’s a clear imbalance. Last financial year Australia exported about $15 billion in goods and services to India but imported only around $3.2 billion, and two‑way merchandise trade fell (exports to India down about 17%, two‑way trade down 12.5%). Australia also makes up only 0.7% of India’s exports, so India is far more important to Australia in trade dollars than Australia is to India.
The trade relationship is narrowly based: just two commodities — coal and gold — accounted for roughly half of all trade between Australia and India in the last financial year. That concentration increases exposure to commodity cycles and limits broader economic ties.
Investment is asymmetric. Indian firms invested about $11 billion in Australia last financial year — much of it in mining and energy projects, especially in Queensland — while Australian investment in India was relatively small at about $4.3 billion. By comparison, Australian investments in China, Japan and South Korea are much larger.
The article points to restrictions in many Indian sectors and slow opening of mining rules that have thwarted some big Australian plans. Government and business leaders have said there are frustrations because regulatory barriers and delayed sector liberalisation have blocked or slowed investments.
Telstra sold its stake in its early India mobile joint venture and exited before market reforms unleashed a huge mobile boom, while ANZ sold Grindlays Bank in 2000 — moves that were later seen as short‑term decisions. The takeaway for investors is that early exits can mean missing large long‑term gains, and building enduring investments in India often requires patience and local trust.
Energy and resources stand out: India has enormous energy demand and reports note Queensland has become a key location for India’s energy security needs. Indian investment into Australian mining projects highlights mutual interest in energy and resources, making those sectors worth watching for investors focused on bilateral ties.
Look beyond diplomatic optimism: check whether trade is diversified, understand regulatory barriers and sector openness in India, and remember that investment — unlike trade — requires deep trust and a long time horizon. The government has improved political footing, but businesses and investors still need to assess sector rules, local partners and the long‑term commitment required.
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