Nearly 10 years in the making, India and Australia inked a landmark economic pact on Saturday, which will see duties being slashed on more than 85% of goods exported to the South Asian nation as both governments secure alternative supply chains and counter an assertive China.
"The trade pact truly is a watershed moment for our relations," PM Modi said after inking the interim agreement. A closer engagement between the two Quad alliance partners comes even as Australia, along with Japan and the U.S., push India to take a stronger stand on Russia’s invasion of Ukraine. The free trade deal is expected to help India forge deeper ties with the raw-material rich nation as it seeks to become a manufacturing hub to revive the pandemic-hit economy.
For Australia, the trade deal would open doors for a market of over 1.4 billion people, as it grapples with China’s trade curbs on a range of commodities exports. "The trade pact signed with India will further deepen our close ties," said Australian PM Scott Morrison.
The signing of the pact comes ahead of a national election campaign in Australia, with Morrison’s center-right government pushing a narrative of strong economic management as it struggles to make up ground in opinion polls.
This is the second major trade agreement that the Modi government has signed so far after sealing a similar deal with the UAE early during the year.
Australia is among India’s top 15 trading partners with a total trade valued at around $20 billion between the two nations in the year ending March 31, according to Indian government data.
The pact, that’s been almost a decade in the making, will give greater market access and slash duties on a range of goods including, sheep meat, wool, wine, coal, alumina and metallic ores, sold by Australia in India.
India has also agreed to reduce duties on Australian wine. Tariffs on shipments with a minimum import price of $5 per bottle will be reduced to 100% from 150% while duty on bottles costing $15 is being slashed to 75%.
The deal would provide duty-free access in its market for over 6,000 broad sectors of India, including textiles, leather, furniture, jewellery and machinery.The agreement is likely to be implemented in about four months.
The agreement would help in taking bilateral trade from USD 27.5 billion at present to USD 45-50 billion in the next five years.
On the very first day of the implementation of the pact, over 6,000 tariff lines would be available for Indian exporters at zero duty.
Australia trades in about 6,500 tariff lines, while India has over 11,500 tariff lines.
Since Australian exports are more concentrated in raw materials and intermediates, many industries in India will get cheaper raw materials which will make them competitive, in particular sectors like steel, aluminium and fabric/ garments.
To safeguard sensitive sectors, India has several goods in the exclusion category in which no duty concessions will be accorded to Australian imports.
Such goods will include milk and other dairy products, toys, sunflowers, seed oil, walnuts, pistachio nuts, platinum, wheat, rice, bajra, apple, sugar, oil cake, gold, silver, chickpeas, jewellery, iron ore and most medical devices.
The agreement will also have a safeguard mechanism that includes stricter rules of origin to prevent any routing of products from a third country; safeguard mechanism to deal with any unusual surge in imports; and similar norms for the steel sector.
For the pharma segment, the pact would provide fast-track approvals and fast-track quality assessment/inspections of manufacturing facilities.
In the services sector, benefits for India include post study work visa of 2-4 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 minister Piyush Goyal said, adding that currently, there are more than 1 lakh Indian students enrolled in various courses in Australia.
He added that Australia has agreed to resolve the double taxation issue being faced by domestic IT companies in that market.
Canberra has also agreed to amend its domestic tax law to stop the taxation of offshore income of Indian firms providing technical services in Australia.
On the other hand, India will be offering zero duty access for over 85 per cent of its tariff lines for Australia which will include products like coal, sheep meat, wool, LNG, coal, alumina, metallic ores, including manganese, copper and nickel; titanium and zirconium.
Coal accounts for about 74 per cent of imports from Australia and currently, it attracts 2.5 per cent duty. About 73 per cent of the coking coal, used mostly by steel players, is imported from Australia. India also imports thermal coal from that nation.
The Open Magazine of India by Artmotion Network (https://magazine.armotion.com/)