India to sign trade agreement with Australia today for lower-duty regime

India and Australia will sign an enhanced partnership agreement on Saturday to boost trade and investment ties. Under the agreement, Australia will provide 100 per cent market access for all Indian goods over a period of five years.

From the first day of the implementation of the trade pact, 95 per cent of the goods will attract lower duty. All labour intensive sectors such as apparel, footwear and jewellery will get zero-duty access from day one, government officials said. Most of the goods exported to Australia attract a 5 per cent duty.

India will get liberalised norms in the services sector that will cover more than 100 sub sectors.

Similarly, India will lower duty access for Australia for more than 70 per cent of goods. This will include coal, which accounts for three quarters of India’s imports from Australia.

While India has also agreed to reduce duties on Australian wine, dairy will not be included in the agreement. “We have tried to preserve the sensitivities (dairy sector) of India,” one of the officials cited above said. Apart from dairy, other items such as iron ore, most medical devices, agricultural products including wheat, rice, sugar, and bajra will not get any duty concession.

To deal with the massive surge in imports, there will also be a provision of a safeguard mechanism. When the negotiations kicked off in September, both countries had then agreed upon finalizing an interim trade deal or an early harvest agreement, that would be followed by a broader trade deal.

However, officials said that both countries went ahead with a larger or an ‘enhanced’ trade agreement as they were on the same page regarding several issues. A broader trade agreement may be worked out at a later stage, but the timeline is not known.

The agreement will be implemented after the Australian Parliament approves it. This is the second major trade agreement that India will sign this year, after inking a similar deal with the UAE in February. India is also negotiating a trade with the United Kingdom right now.

The agreement will be signed at a time when Australia is looking for a reliable trade partner at a time when it is facing export restrictions from China. It will also help India neutralize the disadvantages it has vis-a-vis some of its neighbouring countries, especially in labour intensive sectors such as textiles.

“As far as Australia is concerned, 50 per cent of their tariff lines are already zero and the remaining attracts 5 per cent duty. Most of the goods that we export to Australia attract a 5 per cent duty. So vis-a-vis our competitors such as Bangladesh, with which Australia already has a free trade agreement (FTA) or the fact that Bangladesh is counted as an LDC (least developed country), they have that advantage of 5 per cent, which we did not, especially in labour intensive sectors. That’s where India will be able to neutralize the disadvantage,” one of the officials cited above said.

Australia was India’s 15th largest trading partner in FY21. Petroleum products, medicines, polished diamonds, gold jewellery, apparels are the key items exported to Australia, while coal, alumina and non-monetary gold are key products exported to India.

In services, major Indian exports are related to travel, telecom and computer, government and financial services. In the case of Australia, services exports have mainly been in education and personal travel.

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