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How SMEs can capitalise on renewed Aus-India ties

Australia has taken a strategic direction to strengthen its diplomatic relations with India by signing a bilateral Economic Cooperation and Trade Agreement (ECTA), effective from December 2022.

This agreement is the start of a new relationship between the two nations, with the potential for significant enhancement and strengthening of bilateral commerce and economic cooperation going forwards.

India is Australia’s sixth-largest trading partner and fourth-largest export market. With over 85 per cent of Australian goods exported to India now tariff-free, rising further to 90 per cent over the next six years, this bilateral agreement has opened an abundance of trade diversification growth opportunities for Australian businesses, such as small and medium-sized (SME) enterprises, especially in the e-commerce and export sectors.

These new economic headwinds will likely bring new markets, a new global reach, and new opportunities to Australian businesses – with the Indian Ministry of Commerce and Industry expecting the ECTA to boom bilateral trade above US$45 billion, up from US$12.3 billion in 2020–21.

Furthermore, the Indian economy is one of the fastest growing in the world, a trend that is expected to continue. According to the Centre for Economics and Business Research, India will be the 3rd largest global economy by 2032. 

Australian SMEs wanting to expand into India may find it easier to reap the benefits of trade diversification opportunities with access to the fast-growing Indian market of over 1.4 billion people as a result of the ECTA. 

Understanding Indian customers

India has a burgeoning middle class with access to increased disposable income, fuelling a growing appetite for consumer goods. Personal consumption, for example, contributes to roughly 60 per cent of India’s gross domestic product (GDP).

India has become the world’s most populous country, surpassing China. Its high- and upper-middle-income base is expected to nearly double during the current decade, growing from 24 per cent in 2021 to 51 per cent of the overall population by 2030.

These factors drive a significant increase in the average consumer’s ability to spend, with a projected 250 per cent increase across the population from 2020 to 2025. The fast-growing Indian market of over 1.4 billion people gives Australian SMEs looking to expand into India vast and lucrative businesses opportunities for trade diversification.

E-commerce is in full swing 

Pairing with the well-off middle class is a booming e-commerce industry. According to the government-funded Indian Brand Equity Foundation, the Indian e-commerce industry is projected to surpass the US to become the second-largest e-commerce market in the world by 2034.

In the 2021 financial year, India had the third largest online shopper base globally, sitting at approximately 150 million. With 5G smartphone shipments reaching 169 million in 2023, this trend is expected to continue with the number of online shoppers in India expected to grow to a staggering 350 million by 2026.

This rapid growth in e-commerce has seen transportation and logistics companies like FedEx exponentially grow their fulfilment and distribution capabilities across India to meet customer appetite as well as invest in their talent pool.

Bringing together customer and platform into actionable insights 

But what does this all mean for SMEs and e-tailers, and how might they effectively take advantage of this growth opportunity?  

With goods of all kinds moving around the world every minute of every day, how they get delivered counts and consumers are maturing in their use of e-commerce. FedEx What’s next in e-commerce Whitepaper suggests that Indian consumers are much more optimistic about the importance of e-commerce in the future and are also ahead of the pack across the Asia Pacific, Middle East and Africa region, with 83 per cent of consumers feeling positive about shopping online. 

Additionally, the survey indicates that for Indian consumers, offering a personalised e-commerce service is nearly twice as important as it is for Australian consumers (78 per cent vs. 43 per cent). 

Australian businesses that want to crack the Indian market may wish to consider building out an integrated customer approach – drawing on internal and external data to map out the customer journey. From there, businesses can implement tailored communications, segmented marketing activations and provide personalised complementary product recommendations based on on-site behaviours.

Based on the findings of our whitepaper Indian consumers are likewise more advanced in their attitudes towards new payment methods including mobile wallets that enable payments using crypto-currencies and, therefore, SMEs may want to consider providing ‘Buy Now Pay Later’ India-based options such as Simpl and ZestMoney. 

Another major consideration is that Indian consumers (76 per cent) are much more likely to prioritise delivery lead times over sustainability than Australian consumers (53 per cent). 

This presents two implications for Aussie retailers. First, take advantage of this opportunity to identify and team up with a reliable and trustworthy transport and logistics partner that can fulfil their cross-border logistic needs and possess strong local and global market presence to offer fulfilment capabilities. And secondly, developing and defining an understanding of how to responsibly respond to sustainability challenges when operating in both geographies.

Finally, remember that every SME is unique, with different strategies, goals, markets, and resources. Always remember to conduct your own research and seek professional advice if you wish to take advantage of trade agreements, expand into foreign market or take advantage of trends.

As Australia works to broaden its export markets, the scale of opportunity for Australian e-commerce businesses within the Indian market looks promising. Effectively navigating this opportunity requires an agile approach to customer engagement supported by partners with deep local knowledge.

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Peter Langley

Peter Langley

Peter Langley is the Vice President at FedEx Express Australasia

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