Trade pacts will help drive India’s economic rise

THE Australia-India Economic Cooperation and Trade Agreement (AIECTA) came into effect on December 29. This was India’s second trade deal for 2022, the first being the India-UAE Comprehensive Economic Partnership Agreement in May. Talks with the United Kingdom are in their sixth round and an agreement is likely by March 2023. These deals break a decade-long gap where India didn’t sign a free trade agreement with any large economy. Over that same period, India’s share of global exports stagnated at less than 1.8 per cent.

India’s bilateral trade with Australia is at present small. Total trade between the two countries in 2021 was roughly US$28 billion or about 3 per cent of India’s trade with the world. We expect that to grow to US$50 billion within five years of the signing.

Like most trade deals, AIECTA reduces tariffs, which will boost trade, especially for pharmaceuticals, textiles, jewellery and commodities. Given that these exports from India make up a small share of Australia’s imports (pharmaceuticals about 4 per cent, textiles around 5 per cent, jewellery some 12 per cent) there is significant room for growth. Factors other than tariffs can also be gamechangers.