India’s government has completed its domestic requirements to enable implementation of the Australia-India Economic Cooperation and Trade Agreement (ECTA).
Australia finalised its domestic requirements for the trade agreement in late November with the unanimous passage of the appropriate bills through Parliament.
Benefits for Australia
From 29 December, tariffs on 85 per cent of Australia’s exports to India will be eliminated and tariffs on a further 5 per cent of goods will be phased down.
Entry into force of the agreement before the New Year is due to deliver a double bonus of two tariff cuts in succession: one as the agreement comes into effect and a second on 1 January 2023.
ECTA will save Australian exporters around $2 billion a year in tariffs, while consumers and business will save around $500 million in tariffs on imports of finished goods, and inputs to Australia’s manufacturing sector.
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 services 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.
The Minister for Trade and Tourism, Senator the Hon Don Farrell, said: “Businesses are encouraged to get on the front foot and prepare themselves now to take advantage of the substantial improvements in market access to India under the new agreement. Austrade can assist existing and potential exporters benefit from the lowering of trade barriers into the Indian market.”
Benefits to India
The Indian Government notes that, currently, Australia has an import duty of four-to-five per cent on most of the products of interest to India. The new agreement will will 100% tariff elimination in favour of India in two categories. Firstly, zero-duty on nearly all lines that amount to 96.4% of of the value of Indian exports to Australia. India will immediate duty-free market access as of entry into force of the agreement.
Then there will be a phasing out of a duties on a further 113 tariff lines, amounting to 3.6% of India’s exports within five years.
India has kept many sensitive products in the exclusion category without offering any concession. Some of these are Milk and other dairy products, chickpeas, walnut, pistachio nut, wheat, rice, bajra, apple, sunflowers seed oil, sugar, oil cake, gold, silver, platinum, jewellery, iron ore and most medical devices.
“This is a major gain for India,” reads an official statement from the Indian Ministry of Commerce.
The Indian Ministry of Commerce reports that Australia is the 17th largest partner of India and that India is Australia’s 9th largest trading partner. The bilateral trade in goods (excluding services) is US$22bn. India exports USD$6.9 billion to Australia; India imports US$15.1 billion from Australia.
India’s exports consist primarily of a broad-based basket largely of finished products such as petroleum products, textiles and apparels, Engineering products, leather products, chemicals, Gems & Jewellery etc. India’s merchandise imports from Australia consist largely of raw materials, minerals and intermediate goods. Three quarters of India’s imports from Australia consist of coal, with 70% of coal being coking coal.
