India-Australia Free Trade Agreement Comes Into Force, Bilateral Trade May Cross $70 Bn In 5 Years

Under the pact, Australia is offering zero-duty access to India for about 96.4 per cent of exports (by value) from day one

Global Trade Research Initiative (GTRI) said the trade of value $23 billion would become duty-free from day one.

Source : Representational Image/Getty

New Delhi: The free trade agreement (FTA) between India and Australia came into force today. Exporters are hoping this agreement will boost bilateral commerce to $45-50 billion in around five years. The Prime Minister of Australia Anthony Albanese announced the news, adding that he will be visiting India in March at the invitation of Prime Minister Narendra Modi. 

Prime Minister Narendra Modi said that India-Australia ECTA is a watershed moment for countries' comprehensive strategic partnership. He Tweeted, "Glad that IndAus ECTA is entering into force today. It is a watershed moment for our Comprehensive Strategic Partnership. It will unlock the enormous potential of our trade and economic ties and boost businesses on both sides. Look forward to welcoming you in India soon."

Glad that IndAus ECTA is entering into force today. It is a watershed moment for our Comprehensive Strategic Partnership. It will unlock the enormous potential of our trade and economic ties and boost businesses on both sides. Look forward to welcoming you in India soon. @AlboMP https://t.co/aBGKvKCtZq

— Narendra Modi (@narendramodi) December 29, 2022

Anthony Albanese said, “Today the Aus-India Trade Agreement comes into force. This will deliver new opportunities to Australian businesses. At the invitation of Narendra Modi, I will visit India in March with a business delegation committed to improving two-way trade between our two nations."

According to the economic think tank GTRI, the free trade agreement (FTA) between India and Australia will help boost bilateral trade in goods and services to cross $70 billion in the next five years. 

The India-Australia Economic Cooperation and Trade Agreement (ECTA) has come into force on December 29.

Global Trade Research Initiative (GTRI) said the trade of value $23 billion would become duty-free from day one.

“This is 93 per cent of merchandise trade of $25 billion in 2021-22 between India and Australia. This creates opportunities for more trade in tough times. GTRI estimates suggest that the bilateral trade will cross $70 billion in the next five years due to buoyant trade relations and Australia's gradual weaning away from China,” GTRI Co-founder Ajay Srivastava said in a statement.

Under the pact, Australia is offering zero-duty access to India for about 96.4 per cent of exports (by value) from day one. This covers many products that currently attract 4-5 per cent customs duty in Australia. The agreement, which was signed on April 2, would provide duty-free access to Indian exporters of over 6,000 broad sectors, including textiles, leather, furniture, jewellery, and machinery in the Australian market.

India's goods exports to Australia stood at $8.3 billion and imports from the country aggregated to $16.75 billion in 2021-22.

The tariff commitments provided by India in the agreement will open up access for Australia's exporters of products including critical minerals, pharmaceuticals, cosmetics, lentils, seafood, sheepmeat, horticulture, and wine. 

Australian service suppliers will benefit from full or partial access across more than 85 Indian service sectors and subsectors. Australian suppliers across 31 sectors and subsectors will be guaranteed the highest standard of treatment that India grants to any future free trade agreement partner. 

Economic Cooperation and Trade Agreement (ECTA) will also support tourism and workforce needs in regional Australia by making 1,000 work and holiday programme places available to young Indians. Indian students graduating in Australia to undertake post-study work, with a bonus year of stay for high-performing STEM (science, technology, engineering, or mathematics) graduates.

"India has negotiated ECTA well; it needs to use similar prudence in dealing with new subjects, the onus is now on the Indian industry to translate this advantage into increase in exports,” Srivastava said.

Coal accounts for three-fourths of Indian imports from Australia. He added that the Indian power sector will gain from cheaper coal and domestic factories will gain from cheaper minerals and intermediates.

Australian wine will gain from reduced-duty access to the Indian market. Earlier, India charged a 150 per cent duty on wines. Under ECTA, Australian wines priced above $5 for a 750ml bottle can enter India at reduced duties. This pact also allows limited quantities of Australian almonds, pears, oranges, and mandarins.

“No threat to local produce is seen as India already imports these products in large values, India has exercised prudence in opening its market. It did not provide any concession on dairy products, wheat, rice, bajra, apple, sugar, oil cake, etc. to protect the interest of farmers,” he said.