Elisha Pulivarti/Washington DC
The India- Australia FTA (Free Trade Agreement) which came into force from December 29, 2022, is a historic boost to SMEs (Small and Medium Enterprises) in both the countries, particularly the former. The FTA, actually known as Economic Cooperation and Trade Agreement (ECTA) has been signed eight months before in April 2022. This is India’s first FTA with a developed country since recently.
In 2022, India also entered into an FTA with UAE. Now talks are underway for finalizing FTAs with the UK, EU and Canada. An FTA with the UK was supposed to be inked by Diwali last year, but it got delayed due to political changes in Britain. It is most certain that FTAs with these three nations would be signed much before 2023 end or by G-20 summit in November this year.
Having a trade deal with Australia is a major achievement for India. In fact, India which withdrawn from RCEP (Regional Comprehensive Economic Partnership), a multilateral trade pact where China dominated the trade terms, is looking for better deals with other countries. The back to back FTAs have fulfilled that loss. India’s trade with Australia now at 31 billion US dollars will go up to 50 billion US dollars by 2027.
SMEs will get boost
This FTA will primarily benefit SMEs of India to a large extent as they will get cheaper raw material from Australia and will get duty free access to the Oz markets from now on. Manufacturers of leather products, gems and jewelry, handicrafts, textiles, handicrafts and toys will have wider market access in Australia. Raw materials like critical minerals will now available in India duty free. This again will boost Indian SMEs and create more jobs.
Bot India’s commerce minister Piyush Goyal and Australian trade minister Don Farrel said in their articles to media last week that this FTA is the beginning of a long journey which would bring the two countries further closer over the years. This ECTA will eventually become CECA (Comprehensive Economic Cooperation Agreement) covering all the remaining items on the bilateral trade soon.
India and Australia are coming together for sure on many sectors for sometime. They are members of a Quad (Quadrilateral deal) including the US and Japan. This FTAis solidly backed by their cooperation and understanding on other areas – of security and democratic aspects. Some time later, India will certainly sign an FTA with New Zealand, making a bigger trade block in the region.
This FTA between India and Australia will help thousands of entrepreneurs of SMEs who are already availing PLI (Productivity Linked Incentives) in selected categories. Now Australia is ready to set up units in India under Make India and Start Up initiatives. The problem of double taxation for many items will be solved now. Students and young professional will get easy Australian visas. There will be more people to people visits between the two countries.
(Elsiha Pulivarti is CEO of US India SME Council and a geopolitical analyst, writes regularly for Excel India from Washington DC)