Indian exporters have demonstrated a high utilization rate of the India-Australia Economic Cooperation and Trade Agreement (ECTA), reaching 77 per cent in the first nine months since the implementation of the interim trade deal. This statistic comes from official data, highlighting the agreement’s effectiveness in promoting trade between the two nations. The ECTA allows Indian goods to be exported using the preferential or ECTA route, providing significant benefits to various sectors, including iron and steel products, linens, agricultural products, and electrical conductors.
Under the ECTA, India aims to capitalize on Australia’s preferential market access, which grants zero import duty on 100 per cent of its tariff lines. Before the agreement, approximately 51 per cent of Australia’s 6,500 tariff lines already attracted zero import duty. However, with the implementation of the ECTA, duty for 3,185 tariff lines was immediately reduced to zero in December 2022, benefiting Indian exporters.
The high utilization rate of the ECTA is significant considering the historical challenges India faced with trade deals, such as low awareness about free trade agreements (FTA) and cumbersome certification processes for obtaining a certificate of origin. The utilization rate for India’s FTAs has traditionally been low, estimated at only 20-30 per cent for exports. In contrast, import utilization rates range between 60 and 70 per cent. This trend is attributed to the reduction in import duties, which leads to higher margins for importers.
The positive utilization data for the India-Australia ECTA provides a promising sign for the agreement’s effectiveness and serves as a model to address the historic challenges faced by Indian exporters with FTAs. As Indian authorities continue to promote awareness and streamline certification processes, the hope is that more Indian exporters will take advantage of the benefits offered by FTAs and boost India’s trade relations with its global partners.
