VOL. 15, ISSUE NO. 1 | APRIL 2022
Spotlight
India-Australia trade pact to benefit both countries
India and Australia will soon be signing an interim FTA that is expected to be advantageous for both countries
POLICY WONK
THE India-Australia interim free
trade agreement (FTA), scheduled
to be signed in early April 2022
following months of negotiations that
began in 2011 and were suspended till
2015, is expected to benefit trade for both
countries. India is anticipated to gain in
labour-intensive sectors such as leather,
gems, and jewellery, besides its need for
critical Australian minerals for new sectors,
the development of electric vehicles,
being a priority. On the other hand, Australia
requires skilled labour that India
has in plenty. Besides, both countries are
looking for ways and means to reduce
their dependence on China, a top trading
partner for both countries, and together
they may succeed in this endeavour. The
two countries have also decided to sign
the full pact – the Comprehensive Economic
Cooperation Agreement (CECA)
– before the end of this year.
In 2020, two-way trade between both
countries stood at $24.3 billion and India
was Australia’s seventh-largest trading
partner. According to the latest data
from the Ministry of Commerce in New
Delhi, at a shade less than $20 billion, bilateral
trade in 2021-22 has already surpassed
pre-pandemic levels.
Intense negotiations had preceded
the decision to sign the agreement. The
Prime Ministers of the two countries
held two virtual summits in two years,
while the Australian Trade minister, Mr
Dan Tehan, has held several talks with
the Commerce and Industry Minister,
Mr Piyush Goyal and made many visits
to India.
India and Australia have seen a number
of engagements including the Australian
government announcing investments
worth $280 million to increase
cooperation with India. According to
Australia’s Update to the India Economic
Strategy to 2035, the Australian government
will provide $16.6 million to
strengthen linkages with India’s financial
institutions.
India and Australia, at two ends of the
Indian ocean, have long-standing peo-
Figure1: Trends in India’s engineering exports to Australia in last 5 years ($ million)
Table1: India’s engineering exports to Australia in the current fiscal |
||||||
|---|---|---|---|---|---|---|
| Country | Jan 2020 | Jan 2021 | Growth (%) | Apr-Jan 2020 | Apr-Jan 2021 | Growth (%) |
| Australia | 61.7 | 98.8 | 60% | 478.7 | 1012.1 | 111% |
Source: DGCI&S
Table2: India’s engineering exports to Australia in last five years ($ million) |
||
|---|---|---|
| Year | Engineering exports to Australia | Growth (%) |
| 2016-17 | 596.90 | NA |
| 2018-19 | 1041.01 | 15.8 |
| 2019-20 | 729.77 | -29.9 |
| 2020-21 | 801.25 | 9.8 |
| 2021-22 | 1212.3 (projected) | 51.3 |
Source: DGCI&S and analysis of EEPC India
Table3: Engineering exports to Australia: Projection for next five years ($ million) |
||
|---|---|---|
| Year | Projected engineering exports to Australia | Growth (%) |
| 2021-22 (*) | 1212 | |
| 2022-23 | 1333 | 10 |
| 2023-24 | 1467 | 10 |
| 2024-25 | 1686 | 15 |
| 2025-26 | 1939 | 15 |
*Projected
Source: Quick estimate by EEPC India
Table4: Engineering exports to Australia: Growth in 11 months of 2021-22 ($ million) |
|||
|---|---|---|---|
| Country | April-February 2021 | April-February 2022 | Growth (%) |
| Australia | 713.4 | 1137.6 | 59.5 |
ple-to-people ties. The Indian diaspora is Australia’s fastest-growing large diaspora community. The Indian-born population became Australia’s second-largest overseas- born migrant group behind the UKborn at 721,050-strong in 2020. Therefore, the diaspora forms an important element in all negotiations to strengthen relations between the two countries.
Projection of India’s engineering exports in next 5 years.
India’s engineering exports to Australia
India is a significant trade partner of Australia. In terms of engineering, India is among the top 25 suppliers to Australia. Australia remains India’s biggest market in the Oceania region. In spite of these factors, India’s share in Australia’s engineering imports basket remains below 1 percent. An FTA with Australia may be a catalyst to increase India’s share in the Australian engineering market. We have depicted in Figure1 a projection of exports growth to Australia when the India-Australia FTA is successfully concluded.
Export performance in current year
During April-January 2021-22, engineering
exports to Australia recorded a sizeable
111 percent rise to $1012.1 million from
$478.7 million in the same period last fiscal.
trend in the last few years. Table2 also
indicates that barring 2019-20, India’s
exports to Australia in the last five years
consistently grew at almost double-digit
growth rate. Average annual growth rate
for the last five years stood at around 11.6
percent. The CAGR for exports to Australia
in the last five years also stood at 7.6 percent.
Interestingly it is observed that in the
case of Australia the projected exports
set in the beginning of the FY 2021-22
were $1006.5 million. However, already in
April-January 2021-22, Indian engineering
Table5: India’s top engineering exporting products to Australia ($ million) |
|||
|---|---|---|---|
| Major engineering products | Apr-Feb 2021 | Apr-Feb 2022 | Growth (%) |
| Products of iron and steel | 155.08 | 1137.6 | 59.5 |
| Electric machinery and equipments | 86.73 | 112.31 | 29.5 |
| Automobiles | 41.78 | 101.30 | 142.5 |
| Iron and steel | 41.38 | 100.65 | 143.2 |
| Railway transport equipments, parts | 3.51 | 94.31 | 2584.0 |
| Industrial machinery for dairy etc | 52.16 | 78.07 | 49.7 |
| Aluminium, products of aluminium | 33.44 | 62.31 | 86.3 |
| ATM, injecting moulding machinery etc | 36.23 | 43.78 | 20.8 |
| Auto tyres and tubes | 31.40 | 42.22 | 34.5 |
| Hand tool, cutting tool of metals | 24.45 | 27.69 | 13.2 |
| Auto components | 24.76 | 27.39 | 10.6 |
Source: DGCI&S
Table5: India’s top engineering exporting products to Australia ($ million) |
|||
|---|---|---|---|
| Major engineering products | Apr-Feb 2021 | Apr-Feb 2022 | Growth (%) |
| Products of iron and steel | 155.08 | 1137.6 | 59.5 |
| Electric machinery and equipments | 86.73 | 112.31 | 29.5 |
| Automobiles | 41.78 | 101.30 | 142.5 |
| Iron and steel | 41.38 | 100.65 | 143.2 |
| Railway transport equipments, parts | 3.51 | 94.31 | 2584.0 |
| Industrial machinery for dairy etc | 52.16 | 78.07 | 49.7 |
| Aluminium, products of aluminium | 33.44 | 62.31 | 86.3 |
| ATM, injecting moulding machinery etc | 36.23 | 43.78 | 20.8 |
| Auto tyres and tubes | 31.40 | 42.22 | 34.5 |
| Hand tool, cutting tool of metals | 24.45 | 27.69 | 13.2 |
| Auto components | 24.76 | 27.39 | 10.6 |
Source: DGCI&S
Figure2: India’s projected target exports to Australia ($ billion)
Source: EEPC India Analysis
exports to Australia have reached $1012.1 million. Hence we have already overachieved the export target to Australia. Considering the average monthly growth rate of 2021-22 we are now expecting India to achieve $1212.3 million exports to Australia at the end of 2021-22.
Projected engineering exports in next five years
Given this scenario we hope that the FTA with Australia would definitely help in boosting engineering exports to Australia. Assuming that realisation of the actual impact would not happen in the initial phase, we are expecting approximately 10 percent growth in engineering exports to Australia in the first two years and 15 percent thereafter.
India’s engineering exports to Australia
registered noteworthy growth during
the last 11 months of the current fiscal.
(Table4&5)
After the successful implementation of
the India-Australia CECA, India’s engineering
exports are expected to increase
from $1.3 billion to $2.2 billion in the
next five years. (Figure2)
From EEPC India Research and Internet sources
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