Consignment of goods such as jewellery and engineering items are set to be flagged off on Thursday as the India-Australia interim trade deal goes live after an eight-month wait.
The interim pact, also known as Economic Cooperation and Trade Agreement (ECTA), has the potential to double bilateral trade to $50 billion in half a decade. The trade deal was signed on April 2.
India is set to benefit from the preferential market access provided by Australia on 100 per cent of its tariff lines – 98.3 per cent tariff lines from December 29. The rest will be in a phased manner for five years.
This is expected to boost labour-intensive exports of items such as automobiles, textiles, gems and jewellery, medical devices and engineering goods.
The Confederation of Indian Industry (CII) said this can lead to a $10-billion jump in India’s merchandise exports by FY27. It will also help create an additional one million jobs in India and open more job opportunities in Australia.
The major boost for India would be in its labour-intensive sectors as Australia imposed 4-5 per cent import duty on these items. These will gain immediate duty-free access, it said.
According to a report released by Global Trade Research Initiative (GTRI), products worth $23 billion will become duty-free from Day One of implementation of the trade deal.
Total trade between both the nations was $25.56 billion during the fiscal year 2021-22. This means that 93 per cent of merchandise trade in the previous fiscal will attract zero duty from Thursday.
On the other hand, Australia will get preferential access to over 70 per cent of India’s tariff lines. Around 40 per cent of the tariff lines will get zero-duty access immediately. This will include zero duty on coal, manganese ore, copper concentrates, bauxite, sheep meat, cherries and wool, among others.
The CII said it will provide cheaper raw materials to many sectors, including steel and aluminium from Australia. The ECTA would also facilitate increased investments from Australia and support Indian manufacturing, it added.
For the first time, India also agreed to liberalise wine under a trade pact. The government had tried hard to protect the domestic industry while also opening the path for greater investments and tie-ups with Australian companies.
Towards this, India reduced Customs duty on Australian wines, but in a staggered manner.
Experts believe that unlike India’s past free-trade agreements, the pact with Australia will benefit both the countries because of the complimentary product and service profile.
“India and Australia do not compete in the same sectors and need each other’s products and services.
India’s exports are diversified, ranging from agriculture, garments, and railway engines to telecom. But 95 per cent of India’s imports from Australia are raw materials and mining products needed by the industry. This makes both countries gain from their exports and imports,” the report said.
Australia was India’s 10th-largest trading partner worth $17.04 billion during April-October.
India exported goods worth $4.73 billion during the first seven months of the current fiscal. It imported goods worth $12.31 billion during the same period.
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