India-Australia Trade Agreement

The Australian Parliament has ratified the Economic Cooperation and Trade Agreement (ECTA) with India. This pact has been seen as an opportunity for growing Indian Businesses.

• In September 2021, Australia and India formally re-launched CECA negotiations with the intention of concluding an Economic Cooperation and Trade Agreement (AI-ECTA).
• It aimsto swiftly liberalise and deepen bilateral trade in goods and services, and to then use this foundation to resume negotiations on the more ambitious CECA.

The India-Australia ECTA:

• It covers almost all the tariff lines dealt in by India and Australia.

• India will benefit from preferential market access provided by Australia on 100% of its tariff lines.
• India will be offering preferential access to Australia on over 70% of its tariff lines.
• Under the agreement, Indian graduates from STEM (Science, Technology, Engineering and Mathematics) will be granted extended post-study work visas.
• It will provide zero-duty access to 96% of India’s exports to Australia and will give about 85% of Australia’s exports zero-duty access to the Indian market
• It will boost bilateral trade in goods and services to USD 45-50 billion over five years, up from around USD 27 billion, and generate over one million jobs in India, according to a government estimate.

Significance:

• Enhanced Exports: Currently, Indian exports face a tariff disadvantage of 4-5% in many labour-intensive sectors vis-à-vis competitors in the Australian market such as China, Thailand, Vietnam, South Korea, Japan, Indonesia and Malaysia.
  • Removing these barriers under the ECTA can enhance India’s merchandise exports significantly.
• Cheaper Raw Materials: Australian exports to India are more concentrated in raw materials and intermediate products.
  • Due to zero-duty access to 85% of Australian products, many industries in India will get cheaper raw materials and thus become more competitive, particularly in sectors like steel, aluminium, power, engineering and so on.
• Change in Perceptions for India: It will help to change perceptions of developed countries towards India as ‘protectionist’ and address scepticism around India’s openness to do business with the world.

Impacts on India:

• Global supply chains get strengthened: India’s rationale for signing a comprehensive economic agreement with these countries is to be part of the global value chains (GVCs), both, trade and foreign investment is central to GVCs.
• Stronger Indo-Pacific: Strong Australia India economic ties will also pave the way for a stronger Indo-Pacific economic architecture.