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India is getting Hotter for Investors: Australian trade deal, Russia Oil to $42B Japanese deal.

Updated: Apr 11

Opinion by Sushant Singh from Sydney, NRI Herald Australia 10 April 2022

India is the best investment destination in the world

India is becoming the hottest investment destination in the world. With the population of 1.25 billion and world's biggest middle class, projected GDP growth of over 7.5+, their is no looking back for India anymore. While the world is slumping post COVID & Wars, this ASIAN Tiger is roaring like never before.


INDO-RUSSIA OIL DEAL WILL CHANGE THE ENERGY MARKET

The US has been lecturing India on its place in history for undermining global efforts to corner Moscow, but New Delhi is simply keeping its self-interest at the fore — much like the West

India is the best investment destination in the world

When asked about India's plans to buy discounted oil from Russia, White House Press Secretary Jen Psaki said last week it wouldn't amount to a violation of Western sanctions against Moscow but New Delhi should know that history wouldn't be kind to it for undermining efforts to isolate Moscow with sanctions.

"Think about where you want to stand when history books are written at this moment in time. Support for the Russian leadership is support for an invasion that obviously is having a devastating impact," Psaki said.

As it turns out, India has more pressing concerns than worrying about its place in Western history books. Indian state-owned oil companies have ordered 5 million barrels of heavily discounted oil from Russia and don't seem averse to buying more. Russia has offered oil to India at steep discount of $35 barrel on prices before war as mounting international pressure lowers the appetite for its barrels elsewhere following the invasion of Ukraine.


Buying oil on the cheap is not a luxury but a necessity for India, which imports 85% of its oil needs. The heavy reliance on imported fuel means that when crude oil prices go up — as they have now — India's finances come under extreme stress and budget estimates go for a toss.

India is putting its self-interest at the fore very much like the European Union, which continues to buy oil and gas from Russia; or the United States, which has refrained from banning Russian uranium imports for its nuclear plants, or Washington's Middle Eastern ally Saudi Arabia, which is busy filling up its coffers with US dollars and doesn't seem to be in any rush to pump in more oil to help steer prices lower.


INDO-AUSTRALIA TRADE DEAL IS HISTORICAL

India is the best investment destination in the world

Australia has has opened up 1,000 working holiday visas to Indian backpackers and will allow top Indian IT, engineering, mathematics and science graduates to stay slightly longer in Australia post-study.


India and Australia signed an interim trade deal encompassing goods and services that is expected to cement strategic relations between the two sides and enhance bilateral trade while lowering tariff barriers. This trade deal also mark the history where two countries have looked at each other without the myopic view of skill migration & visas.


The Coalition has hailed the agreement as a significant step in its efforts to diversify export markets and reduce Australia's economic dependence on China by opening up new opportunities in a large and expanding economy.


Key points:

  • The "early harvest" agreement between Australia and India is a comprehensive agreement close to a full free trade agreement.

  • The agreement will include cuts and phased reductions of tariffs on a range of Australian exports, including coal, sheep meat and lentils.

  • Major exports such as dairy and beef have been excluded from the interim agreement because of domestic political opposition in India.

  • This is lower than other FTAs struck by Australia. And Australia has not been able to convince India to tear down barriers to Australian goods in sensitive sectors including chickpeas, dairy- they're excluded

Major boost to Top Indian STEM Graduates from AUS universities.

Australia has has opened up 1,000 working holiday visas to Indian backpackers and will allow top Indian IT, engineering, mathematics and science graduates to stay slightly longer in Australia post-study.


The “early harvest” agreement is much wider than originally flagged and will be notified to the World Trade Organization, indicating it has the legal status of a full free trade deal. It will cut tariffs on a range of Australian exports to India, including coal, lentils, lobsters and rare earths.

So far, China dominates key Australian markets such as pharmaceuticals, textiles, plastics, toys, footwear and leather goods. Now the India-Australia Economic Cooperation and Trade Agreement (IndAus ECTA) could make India an alternative to China. Friction between Canberra and Beijing has brought a series of official and unofficial Chinese trade sanctions on Australian exports including coal, beef, seafood, wine and barley.


INDO-JAPANESE $42B INVESTMENT DEAL IS JUST THE BEGINING

India is the best investment destination in the world

Japan is the third largest investor in the Indian economy with cumulative FDI inflows of $30.27 billion during 2000–2019’. The country contributed 7.2% to India's total FDI inflows during the same period.


When the Prime Ministers of India and Japan met in Delhi last week, the talks veered towards China also. Prime Minister Fumio Kishida was in India to attend the 14th India-Japan Annual Summit, held after a gap of three-and-a-half years.


Prime Minister Narendra Modi briefed PM Kishida on the situation at the Line of Actual Control (LAC) with China. And he also stressed on PLA’s attempts at “multiple transgression” on the LAC.


According to Fitch Solutions, as of August 2021, Japan had 259 billion dollars invested in unfinished projects in Malaysia, the Philippines, Indonesia, Thailand and Vietnam, compared with China’s $157 billion.


Japan is the third largest investor in the Indian economy with cumulative FDI inflows of $30.27 billion during 2000–2019’. The country contributed 7.2% to India's total FDI inflows during the same period.


The public and private investment and financing from Japan to India in the next five years, which will amount to 5 trillion Japanese yen ($42B), will be used to finance both public and private projects of mutual interest.


JICA, or Japan International Cooperation Agency, is involved in at least 27 recent and on-going activities in India. These projects stretch across sectors such as health and medical care, transportation, power and energy, urban environment management, and agricultural and rural development, among others.


In particular, the transportation projects include Phase 2 of the Delhi Mass Rapid Transport System Project, Hyderabad Outer Ring Road Project, Visakhapatnam Port Expansion Project, and Dedicated Freight Corridor Project.


On March 16, a financial daily reported that JICA expects to fund $3 billion worth of projects in India in 2022-23. JICA is also financing other big infrastructure projects such as the Mumbai-Ahmadabad High Speed Rail and the Mumbai Trans Harbour Link. Other announcements during the summit included the Clean Energy Partnership and the Sustainable Development Initiative for the North Eastern Region of India.


Japan’s new investment target re-affirms the special strategic partnership between India and Japan. The latest meeting between the prime ministers of the two countries marks another step towards deepening regional cooperation amid an increasingly assertive China.

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