Celebrating Two Years of India-Australia Economic Cooperation and Trade Agreement Success (GS Paper 2, IR)
Why in News?
- The India-Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA) has completed two successful years, significantly strengthening economic ties between the two nations.
- This agreement has boosted growth, MSMEs, businesses, and employment in both countries.
- As the agreement enters its third year, India aims to sustain the momentum to achieve the Vision 2047 goal of becoming a developed country.
About the India-Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA)
- Tariff Reductions: ECTA has led to significant reductions in tariffs, with over 90% of Australian goods exports to India now tariff-free. By 2026, 100% of imports from India will also be tariff-free.
- Stepping Stone to CECA: ECTA is a crucial step towards a Comprehensive Economic Cooperation Agreement (CECA) between Australia and India.
- Trade Target: Both nations aim to reach a bilateral trade target of AUD 100 billion by 2030.
Background
- Agreement Signed: India and Australia signed the Economic Cooperation and Trade Agreement (ECTA) in April 2022, which came into effect on December 29, 2022.
Significance of ECTA for India
- Labour-Intensive Sectors: India benefits from duty-free access to Australian markets for goods in labour-intensive sectors like textiles, footwear, sports goods, pharma, and furniture.
- Manufacturing Sector: India's exports of garments, leather products, machinery, and railway wagons gain from reduced tariffs. India gets a slight duty advantage over countries like Vietnam and Indonesia in the Australian market.
- Power Sector: Coal remains a major import from Australia, and the agreement offers cheaper coal for India's power sector, along with LNG, alumina, and manganese.
- Service Sector: Australia is facilitating Indian services in IT, education, health, business services, and audio-visual industries. Key provisions include a post-study work visa for Indian students and work and holiday visas for youth.
Two Years of Ind-Aus ECTA
- Surge in Bilateral Trade: Bilateral merchandise trade has more than doubled from USD 12.2 billion in 2020-21 to USD 26 billion in 2022-23. The trade moderated to USD 24 billion in 2023-24, with India’s exports to Australia growing by 14%.
- Effective Implementation: The agreement's success is reflected in 79% export utilization and 84% import utilization in 2023, indicating effective implementation.
- Sectoral Growth: Key sectors such as textiles, chemicals, and agriculture have seen growth, while sectors like electronics and engineering hold growth potential.
Progress Towards CECA
- CECA Negotiations: The India-Australia Comprehensive Economic Cooperation Agreement (CECA) is under discussion, with 10 formal rounds and inter-sessional talks already held.
Vision for 2030 and Beyond
- Both nations are committed to deeper economic integration and achieving the trade target of AUD 100 billion by 2030, fostering mutual prosperity and contributing to a resilient global economy.
