India-Australia FTA: All You Need To Know
The Central Board of Indirect Taxes and Customs, India has notified the Rules of Origin for the India-Australia trade pact that is set to kick off on 29 December 2022. This relates to the eligibility requirement so as to claim the preferential customs duty on trade in goods, under the economic cooperation and trade agreement (ECTA).
The agreement was signed by the then Australian Minister for Trade, Tourism and Investment and India’s Minister of Commerce and Industry, Consumer Affairs and Food and Public Distribution and Textiles of India on 2 April 2022.
What is a Free Trade Agreement (FTA)?
The India-Australia Economic Cooperation and Trade Agreement (AI-ECTA) is a free trade agreement to facilitate trade between the two countries. Under an FTA, two countries agree to reduce or regulate customs duties substantially and work around regulatory laws, subsidies, and quotas on products under the trade agreements. The agreement is a kind of preferential deal that will benefit both parties.
The two parties also have to negotiate the rules of origin, that is, determine if products are eligible for reduced or zero duty under the mutually agreed FTA rules.
Why is this deal good news?
Australia can serve as a goldmine for Indian exporters, given that the former is trying to reduce its dependence on China. There have been several informal bans on Australian goods, and China's crippling sanctions on barley and wine, in addition to dumping allegations. Given this situation, Australia is looking to double-trade with India in the near future, which stood at USD 27.5 billion in 2021 in terms of merchandise and services.
The Australian Parliament had given a thumbs up to the India-Australia FTA. This move has been taken positively by India given that it is the first FTA with a developed country (except India-Japan). Most of the FTAs previously have been mainly with South Asian countries. This trade deal is expected to more than double the trade to 60 Bn USD in the next five years.
Impact on education
As per the Australian Trade and Investment Commission (Austrade), the number of students joining Australian universities at pre-pandemic stood at over 52,000 as of June 2022. These numbers are close to the pre-pandemic levels of over 60,000 in 2020. This is in contrast to Chinese students whose enrolment has declined given the Covid management policies of the country, which include travel restrictions. The strengthening of trade and growing confidence between the two countries
Critical minerals partnership
These include elements like Graphite, Lithium, Cobalt, and the like. They are crucial elements for manufacturing Electric Vehicle (EV) batteries and transitioning to renewables. Australia has 21 out of 49 minerals that are critical to decarbonisation. This trade deal will be mutually beneficial to both parties when it comes to critical minerals, given that India will diversify its sources and Australia will diversify its markets. Further, Australia is also India’s largest supplier of cooking coal which is used in steel and iron manufacturing. The reduction of duties following the FTAs will have a cascading impact on reducing the cost of iron and steel goods on the common man.
The wine advantage
Australia will be the major winner here. As per Austrade In 2021, Australia was India’s largest source of wine imports. Australia has a 43 per cent share of the Indian market valued at a record USD 12 million. Exports are also off to a record start in 2022. The reduction in trade barriers following the FTA will help further export Australian wine.
India wine imports from 2016 to 2021 in Mn USD
Source: Austrade
India wine imports from 2016 to 2021 in Mn USD. Even though wine is not the first choice of alcoholic beverage among Indians, it is slowly catching up, with an estimated market growth of 8 per cent.
Labour intensive sectors
India here has a greater edge as it will promote labour-intensive products such as footwear, pharmaceuticals, jewellery, textiles, furniture, etc. among thousands of other smaller sectors. As per some estimates, Australia is offering 96.4 per cent benefits to exports from day one. This deal is one of the pivotal economic developments for India in the decade and has serious
