India and Australia on Saturday signed an economic cooperation and trade agreement under which Canberra would provide duty-free access in its market for over 6,000 broad sectors of India, including textiles, leather, furniture, jewellery and machinery.
The agreement is likely to be implemented in about four months.
The India-Australia Economic Cooperation and Trade Agreement (IndAus ECTA) was inked by Commerce and Industry Minister Piyush Goyal and Australian Minister for Trade, Tourism and Investment Dan Tehan in a virtual ceremony, in the presence of Prime Minister Narendra Modi and his Australian counterpart Scott Morrison.
Goyal said the agreement would help in taking bilateral trade from USD 27.5 billion at present to USD 45-50 billion in the next five years.
He further said the pact will contribute towards large employment generation, which is estimated at around 10 lakh over the next 5-7 years as the labour-intensive sectors are likely to gain the most.
Under the pact, Australia is offering zero duty access to India for about 96.4 per cent of exports (by value) from day one. This covers many products which currently attract 4-5 per cent customs duty in Australia.
Labour-intensive sectors which would gain immensely include textiles and apparel, few agricultural and fish products, leather, footwear, furniture, sports goods, jewellery, machinery, electrical goods and railway wagons.
On the very first day of the implementation of the pact, over 6,000 tariff lines would be available for Indian exporters at zero duty.
Australia trades in about 6,500 tariff lines, while India has over 11,500 tariff lines.
Since Australian exports are more concentrated in raw materials and intermediates, many industries in India will get cheaper raw materials which will make them competitive, in particular sectors like steel, aluminium and fabric/ garments.
To safeguard sensitive sectors, India has several goods in the exclusion category in which no duty concessions will be accorded to Australian imports.
Such goods will include milk and other dairy products, toys, sunflowers, seed oil, walnuts, pistachio nuts, platinum, wheat, rice, bajra, apple, sugar, oil cake, gold, silver, chickpeas, jewellery, iron ore and most medical devices.
The agreement will also have a safeguard mechanism that includes stricter rules of origin to prevent any routing of products from a third country; safeguard mechanism to deal with any unusual surge in imports; and similar norms for the steel sector.
For the pharma segment, the pact would provide fast-track approvals and fast-track quality assessment/inspections of manufacturing facilities.
In the services sector, benefits for India include post study work visa of 2-4 years for Indian students on reciprocal basis; and work and holiday visa arrangement for young professionals, Goyal said.
"Post study work visas will provide extended options for working in Australia to eligible Indian graduates, post graduates and STEM (science, technology, engineering and mathematics) specialists," he said, adding that currently, there are more than 1 lakh Indian students enrolled in various courses in Australia.
He added that Australia has agreed to resolve the double taxation issue being faced by domestic IT companies in that market.
Canberra has also agreed to amend its domestic tax law to stop the taxation of offshore income of Indian firms providing technical services in Australia.
On the other hand, India will be offering zero duty access for over 85 per cent of its tariff lines for Australia which will include products like coal, sheep meat, wool, LNG, coal, alumina, metallic ores, including manganese, copper and nickel; titanium and zirconium.
Coal accounts for about 74 per cent of imports from Australia and currently, it attracts 2.5 per cent duty. About 73 per cent of the coking coal, used mostly by steel players, is imported from Australia. India also imports thermal coal from that nation.
India will also provide duty concessions to Australian wines in a phased manner over a period of 10 years. Concessions would be provided on Australian wines depending upon prices.
Tariffs on wine with a minimum import price of USD 5 per bottle will be reduced from 150 per cent to 100 per cent on the deal's implementation and subsequently to 50 per cent over 10 years.
Similarly, the duty on bottles with a minimum import price of USD 15 will be reduced from 150 per cent to 75 per cent, and subsequently to 25 per cent over 10 years.
According to a statement by the Australian Trade Ministry, duties up to 30 per cent on avocados, onions, shelled pistachios, cashews in-shell, blueberries, raspberries and blackberries will be eliminated over seven years.
"Tariffs on pharmaceutical products and certain medical devices will be eliminated over five and seven years," it said. "Sheep meat tariffs of 30 per cent will be eliminated on entry into force, providing a boost for Australian exports that already command nearly 20 per cent of India's market."
Tehan said the pact will create new opportunities for jobs and businesses in both countries, while laying the foundations for a full free trade agreement.
Both countries will facilitate the recognition of professional qualifications, licensing, and registration procedures between professional services bodies.
There will be eight chapters in the agreement -- goods, services, rules of origin, sanitary and phytosanitary measures, technical barriers to trade, customs procedure and trade facilitation, legal and institutional issues and movement of natural persons, and trade remedies.
The interim deal will pave the way for a Comprehensive Economic Cooperation Agreement (CEPA) with Australia. It will be the second such pact after the one with the United Arab Emirates (UAE), which was signed in February.
Australia is the 17th largest trading partner of India, while New Delhi is Canberra's 9th largest partner. India's goods exports were worth USD 6.9 billion and imports aggregated to USD 15.1 billion in 2021.
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