Context:

The India-Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA) marks its second anniversary.

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• The Ministry of Commerce and Industry announced on Sunday that export utilisation under the India-Australia ECTA had reached an impressive 79% after two years of implementation, with import utilisation slightly higher at 84%. 
• The agreement aligns with India’s vision to become a developed nation by 2047.

About India-Australia Economic Cooperation and Trade Agreement 

ECTA was signed on 2 April 2022 and entered into force on 29 December 2022.

It provides an institutional mechanism to encourage and improve trade between the two countries. It covers almost all the tariff lines dealt with by India and Australia.

India's benefits: 100% preferential access to Australia on tariff lines. 

• Key sectors include gems, textiles, food, agriculture, engineering products, and automobiles.

Australia's benefits: Preferential access to India on over 70% of its tariff lines. 

• Focus on raw materials and intermediaries such as coal and mineral ores.

Trade in Services: 

• Australia’s Commitments: Offers 135 sub-sectors for India’s service exports. Most Favoured Nation (MFN) status in 120 sub-sectors.
• India’s Commitments: Provides access to 103 sub-sectors for Australian services.

Australia is a key strategic partner for India, being part of the Quad, Trilateral Supply Chain Initiative, and Indo-Pacific Economic Forum (IPEF).

Impact of the Ind-Aus ECTA:

Growth in Bilateral Trade

• Since the signing of the Ind-Aus ECTA, the bilateral merchandise trade has seen remarkable growth. 
• Trade volumes more than doubled, surging from USD 12.2 billion in 2020-21 to USD 26 billion in 2022-23. While total trade moderated slightly to USD 24 billion in 2023-24, India’s exports to Australia recorded a significant 14% growth.
• The momentum continued in the current fiscal year, with bilateral merchandise trade from April to November 2024 reaching USD 16.3 billion. 
• The exchange of preferential import data in 2023 highlighted effective implementation, with export utilization at 79% and import utilization at 84%, further underscoring the agreement’s success.

Sectoral Highlights: The Ind-Aus ECTA has fueled growth in several key sectors:

• Textiles, Chemicals, and Agriculture: These sectors have demonstrated substantial growth under the agreement, benefiting from reduced tariffs and enhanced market access.
• Diversified Exports: New export lines, such as gold studded with diamonds and turbojets, reflect the agreement’s role in diversifying trade opportunities.
• Raw Material Imports: India’s industries have benefited from imports of essential raw materials like metalliferous ores, cotton, and wood, reinforcing the win-win nature of the partnership.
• Future Growth Areas: Electronics and engineering remain sectors with significant untapped potential.

Decline in Bilateral Trade

• Despite the high utilisation rates, trade between the two countries has decreased in the current financial year. 
• According to official data, India’s goods exports to Australia stood at $3.99 billion from April to September 2024, down from $4.89 billion during the same period in 2023—an 18% drop. 
• Similarly, imports fell by 18%, declining to $6.7 billion from $8.3 billion last year. This simultaneous decline in exports and imports has resulted in a narrowing trade deficit.

India-Australia Comprehensive Economic Cooperation Agreement (CECA)

• The India-Australia CECA is now in progress and aims to build upon the foundation laid by the ECTA with even greater ambition.
• 10 formal rounds and inter-sessional discussions have taken place so far to advance the CECA.
• CECA is a type of trade agreement between two countries aimed at enhancing economic cooperation and trade relations. 
• These agreements typically cover a wide range of areas, including trade in goods and services, investment, intellectual property rights, and economic cooperation.

Future Prospects

• Both India and Australia are committed to building upon the momentum created by the ECTA and advancing the bilateral trade agenda further through the CECA.
• India and Australia have set an ambitious target to achieve AUD 100 billion in bilateral trade by 2030.