India-Australia signs landmark agreement, paves way for India's growing textile exports 

Leaders from both countries hailed it as a ‘watershed moment’ as the pact is set to provide zero-duty access to 96 per cent of India’s exports to Australia.

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April 6, 2022

India and Australia inked a landmark economic pact -  Economic Cooperation and Trade Agreement (IndAus ECTA) on Saturday, with an eye on doubling bilateral trade to $50 billion in five years. The pact also aims at easing the movement of people, goods and services across borders. 

Leaders from both countries hailed it as a ‘watershed moment’ as the pact is set to provide zero-duty access to 96 per cent of India’s exports to Australia. The goods will be exported from key sectors such as engineering goods, gems and jewellery, textiles, apparel, pharma and leather.

The pact was signed in a virtual ceremony by Australia’s Trade Minister Dan Tehan and India’s Minister of Commerce & Industry, Piyush Goyal. The ceremony was also witnessed by Australia’s Prime Minister Scott Morrison and India's Prime Minister Narendra Modi. 

As per a Reuters report, Morrison told reporters in Tasmania that the agreement with the world's second-most populous nation represented “one of the biggest economic doors there is to open in the world today”. “These are never all or nothing deals as far as we're concerned, we see all of these as the next step and the next step and the next step,” he said, expressing both countries' intention to build closer trade links.

Responding to the landmark free-trade deal, Indian prime minister Narendra Modi said, “on the basis of this agreement, together, we will be able to increase the resilience of supply chains, and also contribute to the stability of the Indo-Pacific region.” 

Boost for India’s Exports

A statement by the Indian government stated this is the first trade agreement with a developed economy after more than a decade. “This agreement will be signalling/messaging for other developed countries agreements such as the UK, Canada and EU, with whom India is currently negotiating for FTA,” it added. 

The pact is expected to boost bilateral trade in goods and services and generate over one million jobs in India, according to a government estimate. The agreement will also give about 85 per cent of Australia’s exports zero-duty access to the Indian market, including coal, sheep meat and wool, and lower duty access on Australian wines, almonds, lentils, and certain fruits.

The estimate added that zero-duty access for Indian goods is set to be expanded to 100 per cent over five years under the agreement. The IndAus ECTA will also provide good scope as a sourcing alternative for Australia to procure Indian products. 

Textile 

The Australian market has good potential for Indian exports of home textiles- bed & bath linen, toilet & kitchen linen, curtains, pillow covers, quilts & comforters, and cotton bags. At present, India’s textile and apparel exports stand at $392 million in 2020-21, which is likely to touch $508 million in 2021-22, showing a growth of 29%.

The government stated that currently, India’s 70% of textile products and 90% of apparel products face duty on export to Australia. And the exports face a tariff disadvantage of 5% in these sectors vis-à-vis competitors with Free Trade Agreements (FTAs) with Australia such as China, Vietnam and Bangladesh. However, with the elimination of duty, India’s exports of textiles and apparel are expected to gain from $392 million to $1100 million in the next 3 years.

‘Reduced dependency on China’

With the India-Australia pact, Morrison’s government is seeking to diversify export markets and reduce the country’s dependence on its biggest trading partner China. This comes after diplomatic spats led to Beijing sanctioning certain Australian products.

The downward spiral in Sino-Australian relations hit the bottom in 2020, alongside the pandemic. The countries witnessed the worst as concerns arose over Chinese involvement in 5G technologies, with fears of security vulnerabilities. Adding to the strained relations, the Australian government announced tougher rules on foreign buyers of agricultural land and electricity infrastructure.

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