India-Australia Trade Pact

The Australian Parliament recently approved the free trade agreement with India. In India, such agreements require approval from the Union Cabinet.

What is AI-ECTA?

  • The Australia-India Economic Cooperation and Trade Agreement (AI-ECTA) was signed by the two countries on April 2, 2022.
  • This free trade agreement eases trade between India and Australia by reducing customs duties, regulatory laws, subsidies and quotas on products under import-export.
  • The pact ensures that the cost of production is cheaper when compared with other countries.

Why is AI-ECTA significant?

  • AI-ECTA is the first free trade agreement that India signed with a large developed economy in the last decade.
  • Besides AI-ECTA and an FTA with Japan, all of India’s FTAs are with other developing countries like Singapore, South Korea, ASEAN, Malaysia and UAE.
  • Once it becomes operaitonalized, AI-ECTA will provide India a duty-free access to Australian market for over 6,000 broad sectors. These include textile, leather, furniture, jewellery, machinery and others.
  • It will help Australia reduce its dependence on Chinese market and forge new bilateral trade ties.
  • Under this free trade agreement, Australia will provide zero-duty access to India for some 96.4 per cent (by value) of its exports. This includes products that currently incur 4 to 5 per cent customs duty in Australia.
  • Numerous labour-intensive sectors in India are expected to benefit from this trade pact. These include textile and apparel, agricultural and fish products, leather, footwear, furniture, sports goods etc.
  • India exported to Australia goods worth 8.3 million USD in 2021-22. India’s imports from Australia was at 16.75 billion USD during this period. The FTA will increase the bilateral trade value from the present 27.5 billion USD to 45-50 billion USD in the next five years.
  • It will enhance people-to-people relations and foster cultural ties between the two countries.
  • It will increase access to a range of skilled service providers, investors and business visitors, boosting investments and business opportunities significantly.



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