India-Australia FTA to be effective from Dec 29

“India & Australia consolidate their long-standing partnership. Economic Cooperation & Trade Agreement, realised under the guidance of leaders of both countries, comes into effect from December 29, 2022. It is the dawn of a whole new era for our businesses & people,” he wrote.

The announcement comes almost nine months after the two countries signed an agreement.

In April, India and Australia signed an interim free trade deal—Economic Cooperation and Trade Agreement (ECTA), which was ratified by the Australian Parliament last week.

India’s President Droupadi Murmu approved the deal.

“The ECTA's two tariff cuts in quick succession intensify the up-front benefits of this agreement for our exporters. Businesses are encouraged to get on the front foot and prepare themselves now to take advantage of the substantial improvements in market access to India under the new agreement. Austrade can assist existing and potential exporters benefit from the lowering of trade barriers into the Indian market,” said Don Farrell, Australia's minister for trade and tourism.

A statement by the Australian government said, “Entry into force of the agreement before the New Year delivers a double bonus of two tariff cuts in quick succession: one as the agreement comes into effect and a second on 1 January 2023. ECTA will save Australian exporters around $2 billion a year in tariffs, while consumers and businesses will save around $500 million in tariffs on imports of finished goods, and inputs to our manufacturing sector.”

As soon as the deal comes into force, Australia will eliminate customs duty immediately on 98.3 percent of the traded goods, while India will do away with customs duties on 40 percent of products immediately.

Over the next five years, Australia will remove 100 percent of tariffs and India would India would remove 70.3 percent of the tariff lines over 10 years.

In FY22, India had a trade deficit of $8.5 billion with Australia, where the value of exports stood at $8.3 billion and imports from Australia were worth $16.8 billion.

Both countries expect the current bilateral trade of $25 billion to cross $45-50 billion in five years after the trade deal comes into force.

The next step in the development is to move forward towards a Comprehensive Economic Cooperation Agreement to build on the interim trade deal, said the Australian statement.

“The Australian Government is pursuing further opportunities in goods and services, in addition to new commitments in areas such as digital trade, government procurement, and new areas of cooperation.”

The elimination of the 5 percent customs duty as part of the FTA will benefit India’s labour-intensive sectors from include textiles and apparel, agricultural products, leather, furniture, jewellery, and pharmaceuticals.