After 2 years of India-Australia trade deal, export utilization reaches 79%

Context: The Ministry of commerce and Industry on Sunday announced that export utilisation
under the India-Australia Economic Cooperation and Trade Agreement (ECTA) has
reached 79% after two years of implementation, while import utilisation stood
at 84%. However, trade between and Australia has declined during the current
financial year. Official trade data revealed that goods exports to Australia
totalled 3.99 billion dollars during the six months from April to September
2024, down from 4.98 billion dollars last year, marking a 18% decline, during
the same period imports also fell by 18%, dropping to 6.7 billion dollars this
year from 8.3 billion dollars last year.

Key points

·       Overview: In April 2022,
India and Australia signed an Economic Co-operation and Trade Agreement (ECTA).
The aim of this agreement is to double the bilateral trade to $50 billion in
five years and ease movement of people, goods and services across borders.

·       Significance
of ECTA for Australia: Many analysts described the ECTA as an antidote for
Australia’s China trouble as it will give exporters duty-free access to India. In
2020, China punished Australia economically after the Canberra government
supported an international inquiry into the origins of Covid-19. Since then,
Australia has witnessed sustained trade sanctions from its top trading partner,
China.

·       Significance
of ECTA for India: Labour-intensive sectors - The major boost
would be in its labour-intensive sectors, which are currently subject to import
duty of 4-5% by Australia.

Manufacturing
sector - Exports of textiles and apparel, leather and footwear, furniture, sports
goods, jewellery, machinery, railway wagons and select agricultural and marine
products are seen to be the top beneficiaries in addition to pharma.

Power sector - Coal accounts
for three-fourths of Indian imports from Australia. LNG, alumina, and manganese
are other vital imports. The Indian power sector will gain from cheaper coal.

Service sector - There are major
gains on the services side too. Australia has committed to facilitate India’s
services in IT, ITeS, business services, health, education and audio-visual,
among others. It has agreed to provide a post-study work visa of 2-4 years for
Indian students and a work and holiday visa for youth. It has also offered a
quota for entry of 1,800 Indian chefs and yoga teachers.

India-Australia relations

·       About: India and
Australia established diplomatic relations in the pre-Independence period, with
the establishment of India Trade Office in Sydney in 1941.

·       Strategic
Relationship: In 2009, India and Australia established a
‘Strategic Partnership’, including a Joint Declaration on Security Cooperation.
This cooperation has been further elevated to Comprehensive Strategic
Partnership (CSP) in 2020. The Australian foreign policy blueprint released in
November 2017 sees India in the front rank of Australia’s international
partnerships. To pursue the CSP, Foreign and Defence Ministers of both
countries agreed to meet in a ‘2+2’ format biennially.

·       Economic
and Trade Relationship: As part of its efforts to develop strong economic
relationship with India, the Australian Government commissioned the India
Economic Strategy to 2035 in July 2018. This was done to define a pathway for
Australia to unlock opportunities offered by Indian Economic growth.

·       Bilateral
Trade: India had a trade deficit of $8.5 billion with Australia in FY22, with
$8.3 billion worth of exports and $16.8 billion worth of imports. Total
bilateral trade is expected to cross $45-50 billion in five years from $ 27.5
billion at present after the free trade deal comes into force. India was the
8th largest trade partner of Australia with trade in goods and services
representing 3% share of the total Australian trade in FY 2019-20.

·       Defence
Cooperation: During PM Modi's visit to Australia in November 2014, both sides decided
to extend defence cooperation to cover research, development, and industry
engagement. India and Australia conduct their bilateral naval exercise
'AUSINDEX' since 2015.

·       Repatriation
of Indian Cultural Artifacts: Several artifacts have been successfully
repatriated to India in recent years. They include-

Ø  Bronze Idol of
Nataraja from Art Gallery of South Australia (AGSA) (2019)

Ø  Nagaraja stone
sculpture (2020)

Ø  Two Dwarpala
stone sculptures (2020).

·       Civil
Nuclear Cooperation: A Civil Nuclear Cooperation Agreement between the
two countries was signed in September 2014 during the visit of then PM Tony
Abbott to India. The agreement provides the framework for substantial new trade
in energy between Australia and India.