Last weekend Canberra and New Delhi broke through ten years of trade-talks frustration and signed a free trade deal between Australia and India.
The Australia-India Economic Co-operation and Trade Agreement (ECTA) will knock-out tariffs on more than 85 per cent of Australian goods entering India and over 96 per cent of Indian goods entering Australia.
Australia’s Prime Minister, Scott Morrison, stated that the “goal is to lift India into our top three export markets by 2035, and to make India the third largest destination in Asia for outward Australian investment,”. He also noted that India is the “the world’s fastest-growing major economy, with GDP projected to grow at nine per cent in 2021-22 and 2022-23 and 7.1 per cent in 2023-24”.
“The agreement would create enormous trade diversification opportunities for Australian producers and service providers bound for India, valued at up to $14.8 billion each year. This agreement opens a big door into the world’s fastest growing major economy for Australian farmers, manufacturers, producers and so many more. By unlocking the huge market of around 1.4 billion consumers in India, we are strengthening the economy and growing jobs right here at home,” the Prime Minister said.
A 2008 joint Indian-Australian feasibility study found that the welfare of Australia and India would both increase with the conclusion of an free trade agreement. The welfare gains for both of the countries could be in the range of 0.15 and 1.14 per cent of Gross Domestic Product (GDP) for India and 0.23 and 1.17 per cent of GDP for Australia.
Economic modelling further added that about 70 per cent of Australian sectors and 68 per cent of Indian sectors are expected to experience an increase in output under a free trade agreement.
A wide range of goods exports from Australia to India will benefit and these include sheep meat, wool, seafood, infant formula, barley / oats / lentils, nuts, fruit & veg, wine, and resources such as coal, alumina, metallic ores such as copper, manganese, and zirconium, among others, and exports of Liquefied Natural Gas.
Writing for the Indian domestic media, the Indian Minister for Commerce, Piyush Goyal, noted that Indian will enjoy greater market access to Australia, which will open up our $12 billion pharmaceutical market. Indian textile exports are expected to triple to $1.1 billion withing three years, creating up to 40,000 new jobs. Engineering product exports from India are forecast to jump from $1.2 billion to $2.7 billion in five years. Ultimately, the trade deal is forecast to create up to one million jobs in India.
Certain products are not included in the deal. The Indian Government continues to protect its dairy market, along with its markets for chickpeas, walnuts, pistachios wheat, rice, bajra, apple, sunflowers, seed oil, sugar, oil cake, gold, silver, platinum, jewellery, iron ore and most medical devices.
Other benefits of the deal include greater visa benefits for students, young professionals, Indians on intra-corporate transfers and various other service providers.
The ECTA deal may yet be a prelude to a bigger-yet deal to come. Canberra and New Delhi announced at the signing of the ECTA deal that both nations continue to work towards as “full Comprehensive Economic Cooperation Agreement”.
Details about the potential Comprehensive Agreement can be found here.
