“The trade pact is really a watershed moment for our relationship,” Prime Minister Modi said after signing the interim deal. A closer engagement between the two Quad alliance partners comes as Australia, along with Japan and the United States, push India to take a tougher stance on the invasion of Ukraine by Russia. The free trade deal is expected to help India forge closer ties with the commodity-rich nation as it seeks to become a manufacturing hub to revive the pandemic-hit economy.
For Australia, the trade deal would open doors to a market of more than 1.4 billion people, as it grapples with trade restrictions imposed by China on a range of goods exports from based. “The trade pact signed with India will further deepen our close ties,” said Australian Prime Minister Scott Morrison.
The signing of the pact comes ahead of a national election campaign in Australia, with Morrison’s centre-right government pushing a strong economic management narrative as it struggles to catch up in the opinion polls.
This is the second major trade deal the Modi government has signed so far after striking a similar deal with the UAE earlier this year.
Australia is among India’s top 15 trading partners with total trade valued at around $20 billion between the two countries in the year ending March 31, according to Indian government data.
The pact, which lasted nearly a decade, will provide better market access and lower duties on a range of products, including sheep meat, wool, wine, coal, alumina and metal ores , sold by Australia to India.
India has also agreed to reduce duties on Australian wine. Tariffs on shipments with a minimum import price of $5 per bottle will be reduced by 150% to 100%, while duties on bottles costing $15 will be reduced to 75%.
The deal would provide duty-free access to its market for more than 6,000 of India’s major sectors, including textiles, leather, furniture, jewelry and machinery. The agreement is expected to be implemented in approximately four months.
The agreement would help increase bilateral trade from the current $27.5 billion to $45-50 billion over the next five years.
On the very first day of the pact’s implementation, over 6,000 tariff lines would be available to Indian exporters at zero duty.
Australia trades around 6,500 tariff lines, while India has over 11,500 tariff lines.
Since Australian exports are more concentrated in raw materials and intermediate products, many industries in India will get cheaper raw materials that will make them competitive, especially sectors like steel, aluminum and fabrics/ clothes.
To protect sensitive sectors, India has several products in the exclusion category in which no tariff concessions will be granted to Australian imports.
These goods will include milk and other dairy products, toys, sunflowers, seed oil, nuts, pistachios, platinum, wheat, rice, bajra, apple, sugar, cakes , gold, silver, chickpeas, jewelry, iron ore and most medical products. devices.
The agreement will also include a safeguard mechanism including 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 standards for the steel sector.
For the pharmaceutical segment, the pact would provide expedited approvals and expedited quality assessment/inspection of manufacturing facilities.
In the service sector, benefits for India include 2-4 year post-study work visa for Indian students on reciprocal basis; and agreement on work and holiday visas for young professionals.
“Post-study work visas will provide expanded options for working in Australia to eligible Indian graduates, postgraduates and STEM (science, technology, engineering and mathematics) specialists,” Trade Minister Piyush Goyal said. adding that there are currently over 1 lakh Indian students enrolled in various courses in Australia.
He added that Australia has agreed to address the double taxation problem faced by domestic IT companies in this market.
Canberra has also agreed to amend its national tax laws to end the taxation of offshore income from Indian companies providing technical services in Australia.
On the other hand, India will provide zero-duty access for over 85% of its tariff lines to Australia, which will include products such as coal, mutton, wool, LNG, , alumina, metal ores including manganese, copper and nickel. ; titanium and zirconium.
Coal accounts for approximately 74% of imports from Australia and is currently subject to a 2.5% tariff. About 73% of coking coal, used mainly by steelmakers, is imported from Australia. India also imports thermal coal from this country.