Explained: What makes India and Australia's free-trade deal, 11 years in the making, historic

After 11 years, India and Australia have signed a historic trade deal — the Australia-India Economic Cooperation and Trade Agreement (Ind-Aus ECTA). After the ink had dried on the contract, Prime Minister Narendra Modi said, “The trade pact truly is a watershed moment for our relations.” But, what is this deal between India and Australia and what does it mean for the country. Here’a breakdown for you. The news on Ind-Aus ECTA On 2 April, Commerce and Industry Minister Piyush Goyal and Australian minister Dan Tehan signed the ECTA, which was in the making from 2011, in the presence of Prime Minister Narendra Modi and his Australian counterpart Scott Morrison.

It is the first Free Trade Agreement (FTA) that India has signed with a major developed country in over a decade. India had signed a similar deal with the United Arab Emirates in February. The agreement is expected to come into force after it is ratified by the Australian Parliament. What does the deal entail? Under the agreement, Canberra would offer zero duty access to India for about 96.4 per cent of exports (by value) from day one. This covers many products which currently attract 4-5 per cent customs duty in Australia. On the other hand, India will be offering zero duty access for over 85 per cent of its tariff lines for Australia which will include products like coal, sheep meat, wool, LNG, coal, alumina, metallic ores, including manganese, copper and nickel; titanium and zirconium. India has also agreed to reduce duties on Australian wine. Tariffs on shipments with a minimum import price of $5 per bottle will be reduced to 100 per cent from 150 per cent while duty on bottles costing $15 is being slashed to 75 per cent. Under the agreement, Australia has also agreed to resolve the double taxation issue being faced by domestic IT companies in that market. The agreement will also allow for faster approval of Indian medicines by Australian regulators as they have agreed to use inspection reports and approvals from Canada and the EU in the evaluation process for India pharmaceuticals and manufacturing facilities. The ECTA will also allow for granting extended post-study work visas to Indian graduates from STEM (Science, Technology, Engineering and Mathematics). What has India excluded? While the agreement allows for duty concessions for Australian imports, New Delhi has managed to completely shield its dairy sector from any tariff reduction. It has placed several goods in the exclusion category in which no duty concessions will be accorded to Australian imports. These products are: milk and dairy, chickpeas, walnuts, pistachio nuts, wheat, rice, bajra, apples, sunflower seed oil, sugar, oil cake, gold, silver, platinum, jewellery, iron ore and most medical devices. How will both sides benefit from the ECTA? According to a government statement, the pact is expected to boost bilateral trade in goods and services to $45-50 billion over five years, up from around $27 billion, and generate over one million jobs in India. For India, as Australian exports are more concentrated in raw materials and intermediates, many industries in India will get cheaper raw materials which will make them competitive, in particular sectors like steel, aluminium and fabric/garments. Additionally, as the ECTA allows for zero duty access to India, it will enjoy greater market access, pushing India’s export momentum only higher. The easing of regulatory processes in the pharmaceutical sector will give India access to Australia’s attractive $12 billion sector. Commerce Minister Piyush Goyal in an editorial for The Economic Times wrote that the trade agreements with UAE and Australia is estimated to generate one million jobs in the next five-years.

The minister added that it would also increase investor interest and boost India’s position in global supply chains. The ECTA is also beneficial to Australia for several reasons. Firstly, Australia is looking for a new market for its exports after its old friend China took offence to Australia’s actions. Secondly, a deal like this would boost Australian prime minister Scott Morrison’s chances at the upcoming elections.A deal which helps Australia export goods in the long term is valuable and can seal the deal for him. All in all, it appears that the ECTA is a win-win for both countries and also a sign of a change in the geopolitical scene in the Indo-Pacific area, by pushing China to the sidelines. With inputs from agencies Read all the Latest News , Trending News ,  Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook , Twitter and Instagram .