India-Australia ECTA to Enter into Force December 29, 2022

Posted by Written by Melissa Cyrill Reading Time: 4 minutes

Governments of India and Australia have exchanged written notifications and confirmed that the India-Australia ECTA (or Ind-Aus ECTA) will enter into force before January 1, 2023, as planned.

Ind-Aus ECTA in effect from December 29

After signing the India-Australia Economic Cooperation and Trade Agreement (ECTA) on April 2 this year and completing the necessary ratification processes and respective domestic requirements, including internal legal procedures, governments of the two countries have exchanged written notifications. The India-Australia ECTA will enter into force 30 days after this exchange of written notification in accordance with Article 14.7 of the Agreement. Accordingly, the ECTA will come into effect from December 29, 2022.

Key benefits of the India-Australia ECTA 

  • Zero duty by Australia on 100 percent tariff lines
  • Additional 1 million jobs to created in India
  • Increased investments from Australia
  • Indian yoga teachers and chefs will gain annual visa quota

The India-Australia ECTA and its provisions were concluded after extensive consultations with all relevant stakeholders. This is expected to build upon closer relations between the two countries and reach strategic status. The ECTA is expected to significantly expand bilateral trade in goods and services, generate employment, and raise living standards. 

Industries, businesses, students, and professionals in both countries have looked forward to the opportunities arising through this Agreement. As of 2020, Indian migrants became the second-largest group of overseas-born residents, at over 721,000, according to Australia’s Department of Foreign Affairs and Trade.

Duties on 100 percent tariff lines will eventually be eliminated by Australia under the Agreement. On day one, Australia will offer zero-duty access to India for about 96.4 percent of exports (by value) covering many products that presently attract 4-5 percent customs duty in that country. India will get concessions on the balance tariff lines in five years.

Meanwhile, Australian exporters will save around $2 billion a year in tariffs, while consumers and business will save around $500 million in tariffs on imports of finished goods, and inputs to Australia’s manufacturing sector.

It is expected that in the next five years, the ECTA’s implementation will boost two-way India-Australia trade to cross US$45-50 billion from the existing US$31 billion. Both countries will benefit from complementarities in their trade opportunities. This will also strengthen supply chains as cheaper raw materials and intermediate goods from Australia will enable India to manufacture finished products competitively. 

The ECTA will provide duty-free access to Indian exporters for items across 6,000 broad sectors, including textiles, leather, furniture, jewelry, and machinery in the Australian market. The labor-intensive industries in India to make certain gains include textiles and apparel, few agricultural and fish products, leather, footwear, furniture, sports goods, jewelry, machinery, and electrical goods. India’s manufacturing sectors like steel and engineering, leather and cotton and woollen textiles will benefit from duty-free import of coal, alumina, copper, nickel, cobalt, bauxite, raw hides and skin, wool and cotton (up to 300,000 bales) from Australia.

It is estimated that an additional 1 million jobs will be created in India under the ECTA.

Indian yoga teachers and chefs are set to benefit from the annual visa quota. Over 100,000 Indian students will benefit from the provision of post-study work visa (1.5-4 years) under the ECTA. The post study visa ranges from 6 months to 48 months.

Services contribute 74 percent of Australia’s GDP and the Australian IT and start-up sector can source skilled technical and specialized staff from India.

The phramaceutical industry is also set to get a boost and Indian pharma exports could cross US$1 billion by 2025. The ECTA will enable fast-track approval for patented, generic, and biosimilar medicines that have regulatory approvals in the US/EU/UK/Canada markets.

Australia will be getting zero duty access on 70 per cent of our tariff lines which will cover 90 per cent value of their exports. This includes zero duty on 85.3 per cent value of their exports immediately and 3.6 per cent value of their exports over a 10-year phase-out period. Looking into the sensitivity of Indian agriculture sector and few manufacturing segments dominated by MSME, milk and dairy products, wheat, rice, bajra, chickpea, sugar, oil cakes, walnuts, pistachio, gold, silver, platinum, jewellery, toys, etc. have been put under the exclusion list, which will not be given any tariff cut. – Ajay Sahai, CEO, Federation of Indian Export Organisations

The Agreement is thus expected to increase investment opportunities, promote import-export and commerce, create significant additional employment, and facilitate strong ties between the two countries.

Australia is an important strategic partner for India. They are also part of the four nation QUAD, Trilateral Supply Chain Initiative, and the Indo-Pacific Economic Forum (IPEF). The India-Australia ECTA will open a new chapter in their bilateral economic partnership as shared interest and trade complementarities underline the commitments made. 

Australian government welcomes deal with India before January 1, 2023

The Australian government said in a statement: “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 business will save around $500 million in tariffs on imports of finished goods, and inputs to our manufacturing sector.”

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