A win-win deal: India-Australia Trade Agreement


    In News 

    India and Australia would now implement the free trade agreement on a mutually agreed date as the Australian Parliament approved the pact between the two countries.

    About Ind-Aus ECTA 

    • ECTA is the first trade agreement of India with a developed country after more than a decade. 
    • The Agreement encompasses cooperation across the entire gamut of bilateral economic and commercial relations between the two friendly countries.
    • It provides an institutional mechanism to encourage and improve trade between the two countries.
    •  This will also connect with more than seven lakhs of Australia’s Indian diaspora, the second-highest taxpaying diaspora, which makes a significant contribution to Australia’s society and economy. 
    • The deal provides an annual quota of 1,800 for yoga teachers and Indian chefs and a commitment to over one lakh of India’s outgoing students to Australia, who are likely to benefit from post-study work visas ranging from one-and-half years to four years.
    • The Ind-Aus ECTA goes beyond merchandise trade and the Indian services sector also gets a major boost as it makes wide-ranging commitments in around 135 service sectors. 
      • The Most Favoured Nation (MFN) status will be granted in about 120 sub-sectors covering key areas of India’s interest such as IT, ITES, education, health and audio-visual. 


    • It will open a new chapter on India-Australia Comprehensive Economic Partnership between two vibrant economies with shared interests and trade complementarities. 
    • It provides an opportunity for Australian exporters to tap the vast Indian market of 1.4 billion consumers, on the other, it provides an opportunity for Indian exporters to market their value-added products.
    • It will lead to duty elimination on 100 per cent tariff lines with no restrictions and benefit India’s labour-intensive exports such as textiles and apparel, agriculture and fish products, leather, footwear and furniture, several engineering products, jewellery, select pharmaceutical and medical devices, furniture and sports goods. 
      • The agreement would provide duty-free access to over 6,000 broad categories of Indian products in the Australian market.
    • The trade deal will boost exports of pharmaceuticals, India’s second-largest export after petroleum products, to Australia, as medicaments that have already been approved in the US and the UK will get expeditious regulatory approval from Australian authorities.
    • India is the world’s largest importer of coal. Out of India’s coal trade deficit of $24 billion, Australia accounts for $11 billion.
      •  The Ind-Aus ECTA is likely to make coal, a crucial input for India’s energy needs and its industrial growth, available at competitive prices. 
    • It will contribute to the creation of additional job opportunities for Indians in Australia and an additional 10 lakh jobs in India as a result of Australian investments. 
    • The trade deal also resolves the long-pending Double Taxation Avoidance Agreement (DTAA) related to IT/ITES. This will lead to yearly savings of over $200 million, a remarkable achievement.

    Historical Links between the relations 

    • The historical ties between India and Australia started immediately following European settlement in Australia in 1788. 
      • India and Australia established diplomatic relations in the pre-Independence period, with the establishment of the India Trade Office in Sydney in 1941. 
      • The end of the Cold War and simultaneously India’s decision to launch major economic reforms in 1991 provided the first positive move towards the development of closer ties between the two nations

    Present status

    • The India-Australia bilateral relationship has undergone an evolution in recent years, developing along a positive track, into a strategic partnership. 
      • The two nations have much in common, underpinned by shared values of pluralistic, Westminster-style democracies, Commonwealth traditions, expanding economic engagement and increasing high-level interaction. 
      • The long-standing people-to-people ties, ever-increasing Indian students coming to Australia for higher education, and growing tourism and sporting links have played a significant role in further strengthening bilateral relations between the two countries.
      • India and Australia both are Commonwealth countries and parliamentary democracies with similar legal systems. 
      • Australia is an important strategic partner of India and both democracies are part of the four-nation QUAD, Trilateral Supply Chain Initiative (SCRI) and the Indo-Pacific Economic Forum (IPEF). 
      • Manufactured goods such as petroleum, medicaments, diamonds, jewellery, railway coaches and vehicles, milled rice and herbicides constitute 72 per cent of India’s exports to Australia. 
      • India primarily imports raw materials. Eighty-two per cent of its imports from Australia are coal, gold, copper ore, aluminium oxide, liquified natural gas, manganese ore, aluminium waste, pigments, lentils, etc.

    Future Prospects 

    • Considerable preparation and hard work had gone into finalising the negotiating agenda. Indian negotiators must be complimented for managing to get exclusions for the most sensitive sectors, and dairy and agriculture.
    • China is Australia’s largest trade partner with a 33 per cent share in its exports and a 27 per cent share in its imports, compared to India’s 3.7 per cent share in its exports and a 2.4 per cent share in its imports as of 2021. 
      • Strategically, the need for trade diversification away from China for Australia, in view of a multiplicity of geopolitical factors, significantly tilts the balance in favour of India, leading to a win-win partnership.
    • The trade deal will prove to be a milestone in India-Australia relations that will not only increase mutual cooperation but also significantly contribute to boosting economic growth and the strategic partnership between the two countries.

    Mains Practise Question 

    [Q]Closer economic ties with Australia are a critical component of India’s trade diversification strategy. Discuss