India has on 2 April 2022 signed an Economic Cooperation and Trade Agreement (ECTA) with Australia. After Japan and Korea, Australia is the third OECD country to sign a free trade agreement with India. This is India’s third Trade Agreement in recent times after it concluded similar agreements with UK (only early harvest agreement) and UAE.
India and Australia being a part of the Quadrilateral Security Dialogue and partners in the Supply Chain Resilience Initiative give this agreement a strategic significance.
Significant duty reduction on goods for both:
- About 85 percent of Australia’s exports will have no-duty access to the Indian market. Products include coal, sheep meat, wool, metallic ores, alumina, and critical minerals.
- For several other products such as onions, avocados, macadamias, cherries, in-shell pistachios, shelled cashews, raspberries, blueberries, blackberries, duties will be slashed over the next few years.
- Australian wines would be eligible for lower duties.
- The agreement will allow duty-free market access for 96.4 percent value of Indian exports of several labor-intensive sectors including textiles and apparel, some agricultural and dairy products, footwear, sports goods, leather, jewellery, furniture, engineering goods, and some pharma and medical devices.
Provisions for Service Sectors:
- The agreement will grant extended post-study work visas to Indian graduates in the fields of science, technology, engineering, mathematics, and information and communications technology.
- The pact will further strengthen the recognition of professional qualifications and the registration procedures among professional services entities. Both the countries are committed to the movement of professionals as intra-corporate transferees.
- Another key gain for the Indian service sector is the amendment of domestic taxation laws to stop the taxation of offshore income of Indian firms providing technical services to Australia. It may be noted that once the amended law is enforced, the Indian technology companies would not be required to pay tax on offshore revenues in Australia.
According to the experts, the pact is expected to boost bilateral trade in goods and is likely to reach new heights of USD 50 billion in the upcoming five years.
Both countries are willing to deepen the pact and work towards a Comprehensive Economic Cooperation Agreement (CECA). This pact is a clear indication that India means business and is ready to conclude such agreements fast if a mutually favourable deal is served on the table.
India is presently also in talks with Israel, Canada and the European Union.