India’s FTAs with UAE, Australia indicate high utilisation for beneficiary sectors

India’s two major free trade agreements signed last year, first with the UAE and the second with Australia, are both indicating high utilisation in sectors that have benefitted from tariff elimination, according to government sources.

“Numbers compiled by the Commerce Department so far show that with Australia, the FTA utilisation is as high as 90 per cent for items where tariffs have been eliminated immediately, especially where they were brought down from five per cent. With the UAE, the certificates of origin issued indicate over 50 per cent average utilisation of the pact,” an official tracking the matter told businessline.

Benefiting sectors

In case of Australia, Indian exporters have benefited in sectors such as readymade garments, certain engineering goods, marine products, some food items and nuclear reactor parts, the official said. The FTA with the UAE has benefitted Indian exporters mostly in the gems & jewellery sector with some gains also accruing to exporters of petroleum products, electrical machinery, mechanical appliances, automobiles and cereals.

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“The Commerce Department will share the actual utilisation data of the India-UAE Comprehensive Economic Partnership Agreement (CEPA), implemented on May 1, 2022, and the India-Australia Economic Cooperation and Trade Agreement (ECTA), which kicked into force on December 29, 2022, very soon,” the official said.

The indication of higher utilisation for the two free trade pacts is significant as the country’s past FTAs, with partners such as the ASEAN, Japan and South Korea, have been criticised for their low utilisation rates (estimated between four per cent and 25 per cent).

“The utilisation is relatively high when compared with the earlier FTAs mostly because of greater industry consultations during the negotiations and more extensive outreach programme to spread awareness about the pacts,” the source added.

As part of the India-Australia ECTA, Australia eliminated tariffs on about 3,185 tariff lines, most of them at five per cent initially, from the first day of implementation. The sectors that benefitted included textiles and apparel, a few agricultural and fish products, leather, footwear, furniture, sport goods, jewellery, machinery, electrical goods and select pharmaceutical products and medical devices.

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Bilateral trade

India and Australia hope to increase bilateral trade to $100 billion annually from $30 billion now after the full-fledged Comprehensive Economic Cooperation Agreement, currently being negotiated, is sealed.

However, for India and Australia, the ECTA did not result in growth in bilateral trade in the first six months (January-June 2023), which actually declined compared to the previous year. This was in line with overall slowdown in exports from the country due to low global demand.

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“The slow performance was largely because of petroleum. There was growth in a number of items where tariffs were reduced,” the official said.

In case of the UAE, bilateral trade between the two countries increased after the CEPA was implemented. India’s exports to the UAE increased 11.8 per cent to $31.3 billion in 2022-23 compared with the previous fiscal which was more than double the 4.8 per cent increase in exports to rest of the world (excluding UAE). India’s imports from UAE increased by 18.8 per cent in 2022-23 to $53.2 billion.

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