Shri Piyush Goyal*
New Delhi (The Hawk): The India Australia Economic Cooperation and Trade Agreement (IndAus ECTA), which came into effect one year ago, is a shining example of how major initiatives of Prime Minister Narendra Modi's government are meticulously planned after extensive consultation with all stakeholders, and executed effectively to benefit the common man as well as small and medium industries.
The Ind-Aus ECTA is a mutually beneficial agreement between the two cricket-loving nations, reflecting the worldview of the confident and aspirational New India in our Amrit Kaal. It reinforces the strategic partnership between two parliamentary democracies that support the rule of law and have similar legal systems. Both are part of the Quad along with Japan and the US. Both countries have joined the trilateral Supply Chain Resilience Initiative (SCRI) along with Japan; and the 14-member Indo Pacific Economic Framework (IPEF).
The FTA, India's first trade agreement with a developed country in more than a decade, has a phenomenal potential. India primarily imports raw material and intermediate goods from Australia, while its exports are primarily finished products. Therefore, the FTA will reduce input costs of Indian entrepreneurs and make their goods more competitive in the domestic and international markets. This also gives Indian start-ups great opportunities to scale up.
Strong Growth in Exports
Data shows that Ind-Aus ECTA has made a very promising beginning, reinforcing the Modi government's belief that it will help create lakhs of jobs in labour-intensive sectors, as Indian products get 100% duty-free access in the huge Australian market.
India's merchandise exports to Australia are up 14% in April-Nov 2023-24, a decisively superior performance compared with India's trade with the rest of the world in a challenging global environment. Demand in major developed economies has contracted. Australia's overall imports have fallen 4% but its purchases from India have risen strongly. India's imports from Australia have fallen 19%, reducing the trade deficit by 39%.
Exports to Australia under Preferential Lines grew strongly in job-creating sectors. Exports of engineering goods to Australia rose 24% in April-October 2023-24 against only 1% rise in total exports. In readymade garments, the shipments to Australia rose 27%, while overall exports declined. ECTA also helped shipments of electronics goods and plastic to Australia outperform overall exports in these sectors.
Further, India is exporting over 700 new items to Australia. These exports amount to US$335 million in the first 10 months of 2023-24 including smartphones worth $65 million. Other new products include several items in the gems and jewellery sector, light oils, non-industrial diamonds as well as skirts and dresses other than those made with silk.
Big Jump in FDI
Our trade partners recognize that the Prime Minister has steered the Indian economy admirably, making it a bright spot in the turbulent world. Under the PM's leadership, India is on track to become a developed country by 2047. Our trading partners recognize this strength and appreciate our concerns about protecting our sensitive sectors like agriculture and dairy.
Ind-Aus ECTA along with the confidence in India's growth trajectory, investor friendly policies and game-changing reforms carried out by Prime Minister Modi has made India an even more attractive for Australian businesses.
Total Foreign Direct Investment from Australia from January to September this year jumped to US$307.2, seven times the US$42.43 received in the whole of 2022. FDI in consultancy services has jumped to US$248 million from barely US$0.15 million in 2022.
The services sector has blossomed. India's exports of IT and business services continued their robust trajectory. The momentum of ECTA, complemented with other bilateral agreements with Australia in the field of Education, Audio Visual Services and Mobility, provided perfect backdrop for strong growth of more than 50% in business mobility and almost 100% in post-study work visas for Indian students.
The Indian IT industry, relieved of double-taxation after the ECTA, is now competing on level playing field. As per some industry estimates, it has saved tens of millions of dollars in the past year. Buoyed by ECTA success, NASSCOM is putting in place a mechanism to facilitate SMEs in IT sector to expand their footprint in Australia.
NEW APPROACH TO TRADE DEALS
Ind-Aus ECTA and a similar deal with the United Arab Emirates last year, were signed after extensive consultations with every segment of the industry, including national and regional chambers of commerce, exporters, industry-specific groups, economists, trade experts, as well as various ministries and departments. Both FTAs were widely applauded by industry leaders. This is a big step forward from previous trade agreements, which did not involve such extensive consultations.
PM Modi is very clear that every policy or agreement should be in national interest and must be beneficial for the country. In this spirit, we have signed trade deals with Mauritius, Australia and the UAE, and the same guiding principles are shaping the negotiations with other countries.
We aspire for fair, transparent and mutually beneficial agreements that make our businesses competitive, open new markets for them, and more importantly, these FTAs expand trade & commerce and accelerate economic growth, thus creating jobs and business opportunities. The FTA with Australia has demonstrated this in its first year.
*The author is the minister of commerce & industry, food & public distribution, consumer affairs, and textiles