Australia has appointed its top intelligence executive and ethnic Indian, Peter Varghese, as the new high commissioner to India. Varghese, the current head of the Office of National Assessments (ONA), will take over in August from John McCarthy, who has been holding the post in New Delhi since 2004.

The announcement comes at a sensitive time in bilateral relations, with the billion-dollar student market in Australia under threat in the face of racist attacks on Indian students in Melbourne and Sydney. The education industry is critical to Australia with more than 80,000 Indians currently studying there.

But a chill in relations precedes recent events and harks back to the lukewarm, if not downright hostile response, Australia offered to the regularization of the Indo-US nuclear treaty in international bodies. It was because of some not-so-subtle arm twisting by the then Bush administration that saw Australia back off into a neutral corner.

Australia has refused point blank to allow India to import uranium from its mines, which it needs for its growing energy needs. Bilateral relations under the new Kevin Rudd regime can only be described as being coldly polite, as the Labour dispensation in Canberra lets its ideological baggage put bilateral relations in deep freeze.

In making the announcement, foreign minister Stephen Smith said Australia's engagement with India was expanding rapidly in recognition of the country's growing economic and strategic importance and influence.

Australia and India also engage closely on strategic and defence matters, Smith said.

''Military engagement occurs across the full range of activities, including ship visits, service-to-service level talks, professional exchanges and research and development collaboration.

''In 2008 Australia and India decided to step up strategic cooperation by holding annual talks between the chiefs of our defence forces, and by strengthening intelligence and counter-terrorism cooperation,'' the foreign minister said.

India is Australia's fastest growing export market. Though energy and minerals are the main drivers, education services are assuming critical significance.

Newly appointed high commissioner Peter Joseph Noozhumurry Varghese is an ethnic Malayalee, born in Kenya to Indian parents in 1956. He emigrated to Australia as a child along with his family.

Currently, he is director-general of the Office of National Assessments (ONA), an Australian government intelligence agency which reports directly to the prime minister of Australia.

Prior to this he was high commissioner to Malaysia, and then deputy secretary of the Department of Foreign Affairs and Trade. He has also served in Australian missions in Vienna, Washington and Tokyo.

He will also hold concurrent accreditation to Bhutan and is expected to take up his appointment in August 2009.

Varghese is a graduate in history from the University of Queensland and is married with one adult son.