India-Australia FTA: Effective today, trade to triple to $70 bn in 5 years
Virendra Pandit
New Delhi: The India-Australia free trade agreement (FTA), which came into effect on Thursday, will help boost bilateral trade in goods and services to cross USD 70 billion in the next five years, an economic think said.
The two countries signed the India-Australia Economic Cooperation and Trade Agreement (ECTA) on April 2 this year.
It provides duty-free access to Indian exporters of over 6,000 broad sectors, including textiles, leather, furniture, jewelry, and machinery in the Australian market.
According to Global Trade Research Initiative (GTRI), trade worth USD 23 billion will become duty-free from day one. This is 93 percent of merchandise trade of USD 25 billion in 2021-22 between India and Australia.
The think tank estimated that the bilateral trade will cross USD 70 billion in the next five years because of buoyant trade relations and Australia’s gradual weaning away from China, GTRI Co-founder Ajay Srivastava said in a statement.
In 2021-22, India’s goods exports to Australia stood at only USD 8.3 billion and imports aggregated to USD 16.75 billion, showing a trade imbalance.
He said while India’s exports are diversified, ranging from agriculture, garments, and railway engines to telecom, 95 percent of India’s imports from Australia are raw materials and mining products like coal the Indian industry requires.
This agreement will also be an antidote for Australia’s China troubles.
“India has negotiated ECTA well; it needs to use similar prudence in dealing with new subjects,” Srivastava said.
Under the FTA, Australia will import duty-free products from India in key sectors, including labor-intensive ones. Duty on these products will decrease from the current four to five percent to zero.
These goods include textiles, apparel, footwear, furniture, sports goods, jewelry, machinery, railway wagons, and medicines.
Coal accounts for three-fourths of Indian imports from Australia. LNG, alumina, and manganese are other vital imports. 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. India charges 150 percent duty on wines, the highest on any product.
Under ECTA, Australian wines priced above USD 5 for a 750ml bottle can enter India at reduced duties. This pact also allows limited quantities of Australian almonds, pears, oranges, and mandarins.
There is no threat to local produce as India already imports these products in large values, and has exercised prudence in opening its market. It did not provide any concession on Australian dairy products, wheat, rice, bajra (millet), apple, sugar, oil cake, etc. to protect the interest of farmers, he said.
Overall, India immediately allows duty-free import of Australian products under 40 percent tariff lines (or product categories) and will make duty on additional 30 percent tariff lines zero over a period ranging from 3 to 10 years.
In terms of value, 85.3 percent of Australian goods will enter India duty-free immediately and will rise to 89.7 percent cent in 10 years.
