India-Australia sign trade pact; bilateral trade to reach $45 bn in 5 years

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India and Australia inked an economic cooperation and trade agreement (ECTA) on Saturday, under which Canberra will provide duty-free access in its market for over 95 per cent tariff lines, including textiles, leather, furniture, jewellery, machinery and select medical devices.


The deal will take around four months to be implemented.





This is the first trade agreement that India has signed with a developed economy after more than a decade. This agreement was signed at a time when India is already working with other developed countries such as the UK, Canada and the European Union to sign a free trade agreement–an evident shift in India’s strategy.


Australia is the 17th largest trading partner of India and India is Australia’s 9th largest trading partner in the current fiscal. Bilateral trade in goods and services for both the countries is expected to rise from the existing $ 27.5 billion to $ 45 billion in five years.


To arrest a surge in imports and protect the domestic industry, both nations have already worked out a mechanism. The safeguard mechanism will be available for about 14 years from the date of completion of elimination or reduction in tariff.


There will be a special review mechanism for compulsory review after 15 years for certain aspects of the agreement in a time-bound manner. The review, if requested, is compulsory and has to be completed in six months.


Officials said that since Australian exports are more concentrated in raw materials and intermediates, many industries in India will get cheaper raw materials and make them competitive, in particular for sectors like steel, aluminum, garments among others.


On the other hand, for the products of export interest of Australia, India is offering concessions mostly on raw materials and intermediates either in the form of tariff elimination, tariff reduction (TR) with or without a tariff-rate quota (TRQ).


India’s offer includes immediate tariff elimination on 40 per cent of its tariff lines comprising 85 per cent of Australia’s exports in value terms to India and another 30.3 per cent of its tariff lines for elimination or reduction of tariffs in 3,5,7 and 10 years time period. Only a few agricultural products such as oranges, mandarins, almonds, pears and cotton among others have been allowed with limited quota.


India has agreed to reduce duty on Australian wines. Tariffs on wine with a minimum import price of $5 per bottle will be reduced from 150 per cent to 100 per cent on the deal’s implementation and subsequently to 50 per cent over 10 years. The duty on bottles with a minimum import price of $15 will be reduced from 150 per cent to 75 per cent, and subsequently to 25 per cent over 10 years.


India has kept many sensitive products in the exclusion category (29.8% of tariff lines) 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.


For the pharma segment, the pact would provide fast-track approvals and fast-track quality inspections of manufacturing facilities.


In the services sector, benefits for India include post study work visa of two-four years for Indian students on reciprocal basis; and work and holiday visa arrangement for young professionals.


“Post study work visas will provide extended options for working in Australia to eligible Indian graduates, post graduates and STEM (science, technology, engineering and mathematics) specialists,” commerce and industry minister Piyush Goyal said.


He also said that Australia has agreed to resolve the double taxation issue being faced by domestic IT companies in that market. Australia has also agreed to amend its domestic tax law to stop the taxation of offshore income of Indian firms providing technical services in Australia.



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