Two Years of  India-Australia Economic Cooperation and Trade Agreement

Syllabus: GS2/ International Relations

Context

• The India-Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA) completed two years creating new opportunities for MSMEs, businesses and employment in both nations.

India-Australia Economic Co-operation and Trade  Agreement (Ind-Aus ECTA)

• The Ind-Aus ECTA provides an institutional mechanism to encourage and improve trade between the two countries.
  • It entered into force on 29 December 2022.
• Core Features: Australia provides preferential market access on 100% tariff lines, benefiting India’s labor-intensive export sectors such as textiles, leather, and jewelry.
  • India offers preferential access on over 70% tariff lines, mainly on raw materials and intermediaries of Australian export interest, including coal, mineral ores, and wine.

Progress under Ind-Aus ECTA

• The bilateral merchandise trade has surged from USD 12.2 billion in 2020-21 to USD 24 billion in 2023-24, with India’s exports to Australia growing by 14%.
• The export utilisation under the Ind-Aus ECTA has reached 79 per cent after two years of implementation, while import utilisation stood at 84 per cent.
  • Trade Utilisation rates measure how effectively businesses leverage trade benefits, offering insights into procedural efficiencies.
• Key sectors showing growth: Textiles, chemicals, agriculture, and new exports like gold-studded diamonds and turbojets have seen notable growth. Imports of raw materials such as metalliferous ores, cotton, and wood have supported Indian industries.
  • Sectors like electronics and engineering still hold potential for further expansion.

India-Australia Economic Cooperation

• Australia is an important trade and strategic partner of India. 
• Both the countries are part of the 14 country Indo Pacific Economic Forum for Prosperity (IPEF) and Trilateral Supply Chain Resilience Initiative (SCRI) which is expected to strengthen the supply chain resilience in the region.
• FDI from Australia during January-September 2023 was $307.2 million, seven times the $42.43 million received in the whole of 2022.
  • FDI in consultancy services was $248 million from $0.15 million in 2022.
• In FY23, India was Australia’s 9th largest trading partner, and Australia was India’s 13th largest trading partner.
• Trade between India and Australia is expected to cross $45-50 billion by 2035.

Future Plans 

• Strengthening the Indo-Pacific Vision: India and Australia share a commitment to a resilient, inclusive, and open Indo-Pacific region.
  • Both nations are active members of the QUAD, Indo-Pacific Economic Framework for Prosperity (IPEF), and the Supply Chain Resilience Initiative (SCRI) with Japan.
• Comprehensive Economic Cooperation Agreement (CECA): Negotiations are underway for a CECA to build upon ECTA outcomes, targeting greater economic integration and collaboration in strategic sectors.
• Both countries are aiming for bilateral trade to reach AUD 100 billion by 2030.

Concluding remakes

• India and Australia are steadily advancing their economic partnership, leveraging the Ind-Aus ECTA to unlock new opportunities. 
• In recent times, investor-friendly policies and game-changing reforms has made India an even more attractive destination for Australian businesses.
• Together, India and Australia are poised to take their economic partnership to new heights, fostering mutual prosperity and contributing to a more resilient and dynamic global economy.

Source: PIB