Varghese, the current head of the Office of National Assessments (ONA), will take over in August from John McCarthy, who has served in the job since 2004.

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

Varghese served as Australia's High Commissioner to Malaysia from 2000-2002. He also served in Australian missions in Vienna, Washington and Tokyo.

The announcement comes at a sensitive time in bilateral relations, with the billion dollar foreign student market under threat due to spate of attacks on Indian students in Melbourne and Sydney. More than 80,000 Indians are currently studying in Australia.

Announcing Varghese's appointment, 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," Smith said.

"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 also Australia's fastest growing export market with energy and minerals the main drivers but also education services.

ONA is an independent body that directly is directly accountable to the Australian Prime Minister. It provides "all-source assessments on international political, strategic and economic developments" to the Prime Minister and senior Ministers of the government.