A bilateral free trade agreement between India and Australia, which includes significant tariff cuts, will allow India to double trade from about $27 billion to $50 billion in five years.
“This is a watershed moment for our bilateral relationship. Based on this agreement, together we will be able to increase the resilience of supply chains, as well as contribute to the stability of the Indo-Pacific region,” Indian Prime Minister Narendra Modi said in a comment to The Economic Times.
The Australia-India Economic Cooperation and Trade Agreement (AIECTA), which is the first trade agreement signed by advanced economies India in over a decade, is expected to boost bilateral trade as it not only eliminates and cuts tariffs on a wide range of goods, but also addresses issues such as technical barriers and sanitary and phytosanitary restrictions.
Indian textiles, apparel, leather, footwear, and certain agricultural and fisheries products, sporting goods, jewellery, engineering products, and certain pharmaceuticals and medical devices, which are subject to Australian import duties of 4 to 5% instantly get the opportunity to import duty-free. Tariffs on the remaining 113 food items will be abolished within five years. In turn, tariffs on more than 85% of Australia's exports of goods will also be immediately removed, and within 10 years, this cancellation will apply to almost 91% of products.
Unlike other Asian countries, India does not belong to any major regional trading bloc and does not have bilateral or regional trade agreements with most of the world's largest economies. By entering into a duty-free trade agreement with Australia, the country hopes to send a signal to other developed countries that are already negotiating similar agreements with New Delhi (eg the UK, Canada, Israel and the EU).