Why in news?

The India-Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA) has successfully strengthened economic ties, boosting growth, MSMEs, businesses, and employment in both nations.

Entering its third year, the Indian government aims to sustain this momentum to achieve the Vision 2047 goal of making India a developed country.

What’s in today’s article?

• India-Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA)
• Two Years of Ind-Aus ECTA

India-Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA)

• About
  • ECTA significantly reduces tariffs on over 90% of Australian goods exports to India.
    • From 29 December 2022, over 85% of Australian goods exports by value to India become tariff free, rising to 90% in six years.
  • Similarly, 96% of imports from India are now tariff free, rising to 100% by 2026.
  • ECTA is a stepping stone towards a full Australia-India Comprehensive Economic Cooperation Agreement (CECA).
  • Both India and Australia aim to build on ECTA's success, deepening economic integration to achieve a bilateral trade target of AUD 100 billion by 2030.
• Background
  • In April 2022, India and Australia signed an ECTA that came into effect on December 29, 2022.
• Significance of ECTA For India
  • Labour-intensive sectors
    • The major boost would be in its labour-intensive sectors, which are currently subject to import duty of 4-5% by Australia.
    • Now, it will gain immediate duty-free access.
  • Manufacturing sector
    • Exports of textiles and apparel, leather and footwear, furniture, sports goods, jewellery, machinery, railway wagons and select agricultural and marine products are seen to be the top beneficiaries in addition to pharma.
    • Australia is the largest importer of garments in the southern hemisphere.
    • With the ECTA getting operationalised, India will have a slight duty advantage over Vietnam and Indonesia for imports in the Australian market.
  • Power sector
    • Coal accounts for three-fourths of Indian imports from Australia.
    • LNG, alumina, and manganese are other vital imports. The Indian power sector will gain from cheaper coal.
  • Service sector
    • There are major gains on the services side too.
    • Australia has committed to facilitate India’s services in IT, ITeS, business services, health, education and audio-visual, among others.
    • It has agreed to provide a post-study work visa of 2-4 years for Indian students and a work and holiday visa for youth.
    • It has also offered a quota for entry of 1,800 Indian chefs and yoga teachers.

Two Years of Ind-Aus ECTA

• Surge in Bilateral Trade
  • Bilateral merchandise trade more than doubled, increasing from USD 12.2 billion in 2020-21 to USD 26 billion in 2022-23.
  • Trade moderated to USD 24 billion in 2023-24, with India’s exports to Australia growing by 14%.
  • From April to November 2024, bilateral merchandise trade reached USD 16.3 billion, reflecting sustained growth.
• Effective Implementation of ECTA
  • Exchange of preferential import data between the two countries highlights 79% export utilization and 84% import utilization in 2023, showcasing the agreement's effective implementation.
• Sectoral Growth and Diversification
  • Key growth sectors: textiles, chemicals, and agriculture.
  • Diversified exports: gold studded with diamonds and turbojets.
  • Imports fueling industries: metalliferous ores, cotton, and wood products.
  • Growth potential: electronics and engineering sectors.
• Progress Towards CECA
  • India-Australia Comprehensive Economic Cooperation Agreement (CECA) builds on ECTA's foundation, with 10 formal rounds and inter-sessional discussions held.
• Vision for 2030 and Beyond
  • Both nations are committed to deeper economic integration and achieving the trade target of AUD 100 billion by 2030.
  • This partnership aims to foster mutual prosperity and contribute to a resilient global economy.