Australia is the 17th largest trading partner of India and India is Australia’s 9th largest trading partner. India-Australia bilateral trade for both merchandise and services trade is valued at US$ 27.5 billion (Export $ 10.5 Bn & Import $ 17 Bn) in 2021. India’s exports consist primarily of a broad-based basket largely of finished products such as petroleum products, textiles and apparels, Engineering products, leather products, chemicals, Gems & Jewellery etc.
India’s merchandise imports from Australia consist largely of raw materials, minerals and intermediate goods. 3/4th of India’s imports from Australia consist of coal, with 70% of coal being coking coal.
Services sector Gross Value Added (GVA) in the economy accounts for 54% in India and 73% of GVA in Australia.
This is the first trade agreement of India with a developed country after more than a decade.
Salient Features of ECTA
The Australia-India Economic Cooperation and Trade Agreement (ECTA), which entered into force on 29 December 2022. Over 85 per cent of Australian goods exports by value to India are now tariff free, rising to 90 per cent by 1st January 2026, and high tariffs have been reduced on some further agricultural products. In addition, 96 per cent of imports from India are now tariff free, rising to 100 per cent by 1 January 2026.
Only a few agricultural products such as Oranges, Mandarins, Almonds, pears and cotton among others have been allowed with limited quota.
India has kept many sensitive products in the exclusion category without offering any concession. Some of these are Milk and other dairy products, chickpeas, walnut, pistachio nut, wheat, rice, bajra, apple, sunflowers seed oil, sugar, oil cake, gold, silver, platinum, jewellery, iron ore and most medical devices. This is a major gain for India in this Agreement.
Strict Rules of Origin have been included to prevent the third-party goods routed through the Partner country to get preferential benefit under this Agreement. Moreover, for goods to avail the benefit of this Agreement, they would require substantial processing in the territory of the Parties.
Expected Benefits of ECTA
Bilateral trade in goods and services for both the countries is expected to rise from the existing US$ 27.5 billion to US$ 45 billion in 5 years; consolidation and growth of market shares of Indian products and services, and India’s exports in goods and services is expected to increase from US$ 10.5 billion in 2021 to US$ 20 billion by 2026-27 and to cross US$ 35 billion by 2035;
Expected significant increase in exports from the labour-intensive sectors, such as engineering, textiles and apparels, gems and jewellery, leather and footwear, etc., which otherwise suffer from 4-5% tariff in Australia vis-à-vis competitors with which Australia has Free Trade Agreements (such as China, Thailand, Vietnam, South Korea, Indonesia, Malaysia and Japan). Moreover, ease in Australian regulatory processes will promote India’s pharmaceutical exports; thereby contribution towards large employment generation, estimated at around 10,00,000 (ten lakhs) over the next 5 to 7 years, as the labour-intensive sectors are likely to gain the most;
To enhance employment opportunities for Indians in Australia and thereby contributing to growth in remittances back to India;
To promote vertical movement in the value chain with increasing presence of higher value products of advanced technology (Engineering, Electronics, Pharmaceuticals & Medical Devices); and
To access to cheaper raw materials will make industries like steel, aluminium, fabric and garments, etc. competitive.
Some Important Segments of ECTA
On market access in Services, broader and deeper commitments from Australia have been taken across all the sectors and modes of supply.
Australia has offered 135 sub-sectors to India and India has offered 103 sub-sectors to Australia.
Key areas of India’s interest like IT, ITES, Business, Professional Services, Health, Education, Audio-visual are being committed by Australia under this Agreement.
Australia will be providing post study work visa up to 4 years for Indian students; quota of 1800 per year for Indian chefs and yoga instructors; Work & Holiday visa arrangement for young professionals; and temporary entry and temporary stay commitments for up to 4 years for Intra Corporate Transferees, Contractual Service Suppliers and Independent Executives.
Detailed provisions to pursue mutual recognition of Professional Services and Other licensed/regulated Occupations have been agreed to. This will pave the way for initiating dialogues on MRAs in Nursing, Architecture and other professional services between the professional bodies of India and Australia which in turn will facilitate the movement of professionals in each other’s territory.
Double Taxation Avoidance Agreement (DTAA)
The Government of Australia has agreed to amend Australian domestic taxation law to stop the taxation of offshore income of Indian firms providing technical services to Australia. This would resolve the issue that the Indian Government has raised about the Double Taxation Avoidance Agreement between the Government of the Republic of India and the Government of Australia for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.
This was a long pending request of Indian IT industry. Once the amendment is made, the Indian Tech Companies would no longer be required to pay taxes on offshore revenues in Australia thereby enhancing their competitiveness in the international market.
High quality temporary entry and temporary stay commitments (up to 4 years) for Intra Corporate Transferees, Contractual Service Suppliers and Independent Executives. Besides commitments on Business Visitors and Installers and Servicers have also been undertaken.
Commitments on entry, stay and work rights for spouses and dependants. For a natural person of India who has been granted temporary entry and temporary stay or an extension of temporary stay under the categories of Intra Corporate Transferees, Contractual Service Suppliers and Independent Executives for a period of 12 months or longer and who has a spouse or dependant, Australia shall, upon application, grant the accompanying spouse or dependant the right of entry and temporary stay, movement and work for an equal period to that of the natural person.
The Agreement provides a mechanism to apply provisional measures quickly in order to arrest the surge in imports and protect the domestic industry. The safeguard mechanism will be available for 14 years from the date of completion of elimination or reduction in tariff.
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