One Year of India-Australia ECTA

General Studies Paper-2

Context: The India-Australia Economic Cooperation and Trade Agreement, recently completed one year.

Negotiations are also underway for concluding the Comprehensive Economic Cooperation Agreement between the two countries but there is no defined deadline at the moment.

India-Australia Economic Cooperation and Trade Agreement:

The ECTA is a bilateral free trade agreement signed between India and Australia on December 2, 2022. It came into effect on December 29, 2022.

Objectives:

• Boost bilateral trade and investment: Removing tariffs and trade barriers aims to increase trade volume and create opportunities for businesses in both countries.
• Enhance market access: The agreement provides preferential access for Indian and Australian goods and services in each other’s markets. India has agreed to Negative listing after 5 years of coming into force of the Agreement.
• Streamline customs procedures: Simplifying customs processes aims to save time and costs for businesses involved in cross-border trade.
• Promote regulatory cooperation: ECTA encourages harmonization of technical standards and regulations between the two countries.

Expected benefits for India

• Duty-free access for 96.4% of India’s exports to Australia: This includes key sectors like textiles, agriculture, and leather products.
• Exports: Exports are expected to increase by 10 billion by 2026-27 and the total bilateral trade is expected to cross US $ 45-50 billion by 2035.
• Increased job creation: Increased trade is expected to generate approximately 10 lakh new jobs in various sectors in India.
• Greater foreign investment: Improved market access and a more predictable regulatory environment could attract more foreign investment into India.
• Closer economic ties with Australia: ECTA strengthens the economic partnership between India and Australia, opening up new avenues for collaboration.

Achievements so far

• According to official data, India’s exports to Australia grew 14% year on year in value terms to $5.87 billion between April and November 2023 while imports contracted 19% year on year to $11.46 billion in the period.
• The trade deficit between the two countries was $5.2 billion between April and November 2023 as against $8.6 billion in the corresponding period a year ago.
• Exports to Australia on preferential lines grew by 17.8% in the same period and grew by 15.14% on non-preferential lines.
• Meanwhile, agricultural exports to India from Australia are 50% higher since the trade agreement came into force.

Way Ahead

• While ECTA presents promising opportunities, some challenges remain, such as differences in regulatory standards and potential implementation issues.
• Continued dialogue and collaboration between both countries are crucial to maximize the benefits of the agreement.
• Its successful implementation could pave the way for further cooperation and contribute to regional economic growth and development.