India-Australia free trade agreement to come into force from Dec 29

Trade between the two countries is expected to cross $45-50 bn in five years

A trade agreement between India and Australia will be implemented from December 29, almost nine months after the two sides signed a deal.

“India & Australia consolidate their long-standing partnership. Economic Cooperation & Trade Agreement, realised under the guidance of leaders of both countries, comes into effect from December 29, 2022. It is the dawn of a whole new era for our businesses & people,” said commerce and industry minister Piyush Goyal on Twitter.

India’s President has approved the deal. The two nations signed an interim free trade deal—Economic Cooperation and Trade Agreement (ECTA)--in April and the Australian Parliament ratified it last week.

“The ECTA's two tariff cuts in quick succession intensify the up-front benefits of this agreement for our exporters. Businesses are encouraged to get on the front foot and prepare themselves now to take advantage of the substantial improvements in market access to India under the new agreement. Austrade can assist existing and potential exporters benefit from the lowering of trade barriers into the Indian market,” said Don Farrell, Australia's minister for trade and tourism.

Australia, as part of the deal, has agreed to eliminate customs duty immediately on 98.3 per cent of the traded goods and on 100 per cent tariff lines over a period of five years. India will do away with customs duties on 40 per cent of products immediately and on 70.3 per cent of tariff lines over 10 years. Labour-intensive sectors in India that will benefit from the elimination of 5 per cent customs duty include textiles and apparel, agricultural products, leather, furniture, jewellery, and pharmaceuticals.

“Entry into force of the agreement before the New Year delivers a double bonus of two tariff cuts in quick succession: one as the agreement comes into effect and a second on 1 January 2023. ECTA will save Australian exporters around $2 billion a year in tariffs, while consumers and business will save around $500 million in tariffs on imports of finished goods, and inputs to our manufacturing sector,” said a statement by the Australian government.

India had a trade deficit of $8.5 billion with Australia in FY22, with $8.3 billion worth of exports and $16.8 billion worth of imports. Bilateral trade is expected to cross $45-50 billion in five years from $25 billion at present after the trade deal comes into force.

The next step for both countries is towards progressing a Comprehensive Economic Cooperation Agreement to build on the interim trade deal, said the Australian statement. “The Australian Government is pursuing further opportunities in goods and services, in addition to new commitments in areas such as digital trade, government procurement, and new areas of cooperation.”