The best part about India’s Economic Cooperation and Trade Agreement (ECTA) with Australia is that it bundles together both strategic and economic benefits. At the outset, the benefits to India will accrue in the form of access to cheaper coal and minerals such as lithium of which Australia has reserves in abundance. India’s semi-conductor and electric vehicles push could do with reliable supplies of rare minerals. According to industry assessments, Australia accounts for over a third of India’s coal imports, on which a duty of 2.5 per cent is levied. This is likely to be reduced to zero, opening up sourcing options for cement and steel producers. India’s infrastructure building plans could stabilise in the wake of the ECTA. On the services side, visa durations have been liberalised for professionals and those seeking higher education. As per the deal, Australia will eliminate tariffs on 96.4 per cent of the value of Indian exports by value, while India will waive tariffs on 40 per cent of its tariff lines or 86.4 per cent of Australia’s exports by value. Industry observers expect gains in traditional exports such as apparel, leather, jewellery and some agriculture goods. Bilateral trade in goods and services is expected to double from $24 billion now (goods trade accounting for $15 billion, with exports from Australia at over $11 billion) to about $45 billion in five years. Refined petroleum accounts for nearly a quarter of about $4 billion exports to Australia, with medicines, gems and jewellery being other major items. Coal accounts for 80 per cent of Australia’s exports to India, besides gold and aluminium, while education is another major earner.

The negotiators from both sides deserve appreciation for being pragmatic in leaving the difficult issue of dairy exports from Australia for inclusion at a later date and closing the deal, even if it’s an abridged one. The issue has been the bugbear in free trade talks between the two countries holding up an agreement for years now. The signing of the deal also sends out a strong, positive signal on the larger strategic partnership between the two countries, which did come under a shadow following the attempts to exert pressure on India over its position on Ukraine.

India, too, is trying to create a new manufacturing ecosystem, built on a measure of tariff protection and local sourcing. It is to be hoped that FTAs are now being promoted with a view to complement the ₹1.96 lakh crore production linked incentive schemes for 14 sectors, and not to supplant them. A trade deal with Australia holds out promise because the two economies have complementary strengths and few overlaps. This is unlike countries such as Bangladesh, China or Vietnam. If Australia is a major mineral and agri exporter, India specialises in refined petroleum, jewellery, chemicals and garments. However, India will have to concede opening up of government procurement, which amounts to over 20 per cent of GDP or $500 billion, as it has done so with respect to UAE. It should do so on its own terms, keeping the interests of the PLI sectors and the MSMEs in mind.

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