The Economic and Cooperation Trade Agreement between India and Australia finally came into effect on 29th December 2022. Under the milestone trade agreement, Indian goods on all tariff lines will get access to Australian markets with zero customs duty. The ECTA was signed back in April 2022 and was ratified in November.
Cheaper coal imports will be a major benefit for India under the ECTA as 3/4th of our import basket from Australia includes the fossil fuel that feeds the thermal power plants across India. This also means a considerable cut in power cost for industries, making them more competitive in domestic as well as foreign markets. After this deal, 96% of India’s exports will become duty-free.
Australia is more of a raw material and intermediates provider to the world and does not manufacture a lot of commodities. So with the ECTA in place, 85% of Australia’s exports will enter India duty-free. This will make them cheaper for Indian consumers. Plus, not only will India’s raw material imports get quite inexpensive, but Australia will also be able to import finished from India at a very low cost. It will also gain better access to one of the fastest-growing economies.
Addressing industry representatives and media, the Union Minister for Commerce and Industry, Piyush Goyal said that the Agreement has been “negotiated with the speed of Bret Lee and the perfection of Sachin Tendulkar”.
India will benefit from preferential market access provided by Australia on 100% of its tariff lines, including all the labour-intensive sectors of export interest to India, such as Gems and Jewellery, Textiles, leather, footwear, furniture, food, and agricultural products, engineering products, medical devices and Automobiles. On the other hand, India will be offering preferential access to Australia on over 70% of its tariff lines, including lines of export interest to Australia, which are primarily raw materials and intermediaries such as coal, mineral ores and wines.
As regards trade in services, Australia has offered wide-ranging commitments in around 135 sub-sectors and Most Favoured Nation (MFN) status in 120 sub-sectors covering key areas of interest to India. On the other hand, India has offered market access to Australia in around 103 sub-sectors and MFN status in 31 sub-sectors from the 11 broad service sectors. Both sides have also agreed to a separate Annex on Pharmaceutical products under this agreement, which will enable fast-track approval for patented, generic and bio-similar medicines.