Australia may well have walked away with the cricket World Cup, but New Delhi and Canberra are game on another turf — the India, Australia Economic Cooperation and Trade Agreement (ECTA) — which post a year of coming into force on 29 December 2022, shows India on a strong wicket vis a vis its exports to Australia which jumped 17.8 per cent year-on-year– along preferential lines to USD 1.58 billion in April-October 2023.
Under preferential lines, trading partners give preferential access, primarily through duty cuts, to each other’s markets as part of the mutually signed agreements. According to the Commerce Ministry data released on Friday, India’s overall merchandise exports to Australia have grown by 14 per cent yoy in April-November 2023. At the same time, India’s exports to the world fell by 1.39 per cent.
Imports from Australia in April-November 2023 have come down to the extent of 19 per cent. The trade balance has come down significantly by 39 per cent from the once-normal range of USD 9-10 billion to USD 5 billion. Rajesh Agrawal, Additional Secretary, Commerce Ministry attributed the performance to this free trade agreement that was done on comparative advantages with industry leveraging it.
“There are early shoot signs on export growth in the areas where there were preferential tariffs,” says Agrawal. The April to October data, differentiated on preferential lines and non-preferential lines, shows a significant upswing in exports to the tune of 17.80 per cent in the former.
The growth in exports along non preferential lines is lesser at 15.14 per cent which signifies that people are utilising the preferential lines for the purpose of their exports. On the import side, in the case of preferential lines, there is reduction in imports from Australia of 35.74 per cent, led by coal and coke which primarily constitute India’s shipments from Australia.
This time the imports of coke and coal have come down. The broad story here is that exports have been growing and especially so in the preferential lines with across the board decline in tariff. According to the Ministry, 99 per cent odd tariff lines have enjoyed zero duty since the pact entered into force. On the positive, India is gaining market share in that geography, which appears to be happening because of the FTA and according to ministry sources, if the trend continues, that would be a signal that the FTA holding good.
On the sectoral front, engineering goods, drugs, and pharmaceuticals, electronic goods, cereal preparations and miscellaneous processed items, rice, spices, fruits and vegetables, coffee, marine products, meat, dairy and poultry products, ceramic products, and glassware among others (in dark green in table) are items whose exports to Australia have jumped and are more than our exports to the world.
The growth of exports to the world of these items is lesser than growth of exports to Ausralia itself. Engineering goods exports to Australia have scored high, with 7 per cent yoy growth in AprilOctober 2023. When India signed the ECTA and the liberalisation took place in terms of trade, engineering goods saw the maximum duty cut from 5 per cent to zero, pushing up the volume of exports and value to USD 824.03 million from USD 773 million in the year ago period.
Similarly, drugs and pharma — where the duty reduction was not significant — have seen 22 per cent jump in exports as there were other non tariff benefits like expedited approval granted under ECTA, leading to the upward trend. India’s exports of drugs and pharma to the world was 8 per cent.
While there was higher expectation on exports of RMG of all textiles, which grew only 4 per cent, the ministry reckons that this is too short a time for the desired results and that there is need for more understanding of the design and fashion which the export promotion councils are working on with the Australian side.
The other positive news is on electronics goods, the exports of which have grown by a whopping 106 per cent to Australia compared to the 31 per cent jump in India’s electronic goods export to the rest of the world. Largely, exports of 16 of the 22 sectors are growing better in Australia compared to how they are faring across the globe, indicating that the preferential duty India secured in these areas is working in its favour.
Meanwhile, the two nations are currently looking to expand the existing pact to an ambitious Comprehensive Economic Co-operation Agreement (CECA) with the talks progressing well. There are expectations of some negotiations on rules of origin in January 2024 which entails working out detailed product-specific rules and that takes time, according to Agarwal.