India Australia Economic Cooperation and Trade Agreement A Win Win for India and Australia (GS Paper 2, International Relation)
Why in news?
- India and Australia have entered into an Economic Cooperation and Trade Agreement.
- The ECTA was signed on 2nd April, 2022; after Ratification and Exchange of Written Instruments, the Agreement has come into force on 29th December 2022.
A Win-Win for both India and Australia:
- It helps matters that Australia exports largely raw materials to India, while India exports finished goods. The ECTA builds on this complementarity, creating win-win opportunities for the two countries.
Current trade trends between India and Australia:
- India’s imports from Australia amount to 17 US $ billion while its exports to Australia amount to 10.5 US $ billion. However, India’s imports from Australia are primarily (96%) raw materials & intermediate goods. They are highly concentrated in Coal (74% of Australia’s exports to India) out of which 71.4% is coking coal.
- On the other hand, India’s exports to Australia are broad-based and dominated by finished products (consumer goods). India also spends $ 4 bn approx. each year on education of students in Australia.
The IndAusECTA covers the following major areas:
- Trade in Goods
- Trade in Services
- Rules of Origin
- Technical Barriers to Trade (TBT) and Sanitary and Phytosanitary (SPS) measures
- Customs Procedures and Trade Facilitation
- Trade Remedies
- Legal & institutional Issues
- Movement of Natural Persons
Benefits under Trade in Goods:
Indian goods on all tariff lines to get access to Australian market with zero customs duty
- The Agreement will benefit various labor-intensive Indian sectors that are currently subjected to 5% import duty by Australia.
- The agreement will result in immediate market access at zero duty to 98.3% of tariff lines accounting for 96.4% of India’s exports to Australia in value terms.
- The remaining 1.7% lines are to be made zero duty lines over 5 years. Overall, Australia is offering duty elimination on 100% of its tariff lines.
Cheaper Raw Materials, Faster ApprovaI for Medicines
- Immediate duty-free access covers all labour-intensive sectors such as Textiles and Apparel, Agricultural and Fish products, Leather, Footwear, Furniture, many Engineering Products, Jewelry and select Pharmaceuticals.
- As a result, many industries such as steel, aluminium, garments and others will get cheaper raw materials which will enable them to become competitive.
- Both sides have also agreed to a separate Annex on Pharmaceutical products under this agreement, which will enable fast-track approval for patented, generic and biosimilar medicines.
90% of Australian exports by value to get zero duty access to Indian market
- India is offering zero duty access to 90% value of products from Australia (including coal). Zero duty on 85.3 % value of products will be offered immediately while zero duty on 3.67 % value of products will be offered progressively over 3, 5, 7 and 10 years.
- India has offered concessions on Tariff lines of export interest to Australia like Coking coal and Thermal coal, Wines, Agricultural products – 7 of them with TRQ (Cotton, Almonds shelled and in shell, Mandarin, Oranges, Lentils, Pear), Metals (Aluminium, Copper, Nickel, Iron & Steel) and Minerals (Manganese Ore, Calcined Alumina).
- Many sensitive products such as milk and other dairy products, wheat, sugar, iron ore, apple, walnuts and others, have been kept in India’s Exclusion list.
10 Lakh More Jobs, 10 Billion Dollar More Exports in Five Years
- Immediate Duty-Free Access is projected to potentially create 10 lakh jobs in India and additional exports of $ 10 bn from India to Australia in the next five years.
Benefits under Trade in Services:
More than 1 lakh Indian students in Australia to benefit from post-study work visa
- The commitments made by Australia under Trade in Services are the best it has made in trade agreements till now and match its recent FTA with the UK.
- Australia has committed its schedule in the negative list and has also made wide-ranging commitments in around 135 sub sectors with Most Favoured Nation (MFN) status in around 120 sub-sectors.
- The Agreement provides for an Annual Quota of 1,800 for Yoga teachers and Indian Chefs. Post study work visa (18 months – 4 years) will be made available for Indian students. This will benefit more than 1,00,000 Indian students in Australia.
Australian services to get Negative List Treatment after 5 Years
- India has for the first time agreed to Negative listing after 5 years of coming into force of the Agreement.
- Under the negative listing approach, a country treats imported and locally produced goods / services equally in all areas, and areas where this is not done are listed – in the negative list - as exceptions. So, in this case, India would provide this treatment to services exports from Australia, after a period of 5 years.
- India is also making a commitment to Australia in around 103 Service Sub-Sectors with Most Favoured Nation status in around 31 Service Sub-sectors for the first time. Australia gets commitments in banking, insurance, other financial services, business services.
- The Agreement opens avenues for investment in computer related services, telecom, construction, health & environmental services. All these are similar to past FTAs signed by India.
- Commitments have also been made to pursue Mutual Recognition Agreements (MRAs) in professional services in 12 Months.
End to Double Taxation
- The Agreement has removed the discrepancies with regard to use of Double Taxation Avoidance Agreement for taxation of Indian firm royalties, fees and charges.
- Australia has no domestic provision for charging tax on royalties, fees and charges by firms sending these to parent companies.
- A provision in the Double Taxation Avoidance Agreement (DTAA) was used to tax this remittance. However, as an outcome of Ind - Aus ECTA, Australia has made changes in its tax laws, removing this discrepancy. This will eliminate Double taxation from 1st April 2023. As a result, the IT sector can earn higher profits and become competitive.
Way Forward:
- The coming into force of the India Australia ECTA is expected to consolidate and help in the growth of market share of Indian products and services.
- New markets for Indian goods in Australia are also likely to emerge. There is an expected growth in pharmaceutical products with the easing of Australian regulatory processes.
- There is expected to be a vertical movement in value chains with the increasing presence of higher value products of advanced technology.
- Exports are expected to increase by 10 billion by 2026-27 with a creation of approximately 10 lakh jobs. The total bilateral trade is expected to cross US $ 45-50 billion by 2035.
- It is expected that there will be enhanced job opportunities for Indians in Australia and increased remittance and investment flows to India from Australia.
World’s longest river cruise ‘Ganga Vilas’ to unlock River Cruise tourism in India
(GS Paper 3, Economy)
Why in news?
- The launch of world’s longest river cruise with MV Ganga Vilas by the Prime Minister on 13 January, 2023 in Varanasi will herald a new age of river cruise tourism for India.
- The luxury cruise will cover a distance of more than 3,200 kms across 27 river systems in 5 states in India and Bangladesh.
Key Highlights:
- The MV Ganga Vilas cruise is curated to bring out the best of the country to be showcased to the world. The 51 days cruise is planned with visits to 50 tourist spots including World Heritage Sights, National Parks, river Ghats, and major cities like Patna in Bihar, Sahibganj in Jharkhand, Kolkata in West Bengal, Dhaka in Bangladesh and Guwahati in Assam.
- The MV Ganga Vilas vessel is 62 meters in length, 12 meters in width and comfortably sails with a draft of 1.4 meters.
- It has three decks, 18 suites on board with a capacity of 36 tourists, with all the amenities to provide a memorable and luxurious experience for the tourists.
- The ship follows sustainable principles at its core as it is equipped with pollution-free mechanisms and noise control technologies.
- The maiden voyage of MV Ganga Vilas will witness 32 tourists from Switzerland relishing the Varanasi to Dibrugarh journey. The expected date of arrival of MV Ganga Vilas in Dibrugarh is on 1st March, 2023.
Itinerary of MV Ganga Vilas:
- From the famous “Ganga Arti” in Varanasi, it will stop at Sarnath, a place of great reverence for Buddhism. It will also cover Mayong, known for its Tantric craft, and Majuli, the largest river island and hub of Vaishnavite cultural in Assam.
- The travellers will also visit the Bihar School of Yoga and Vikramshila University, allowing them to soak in the rich Indian heritage in spirituality and knowledge.
- The cruise will also traverse through the biodiversity rich World Heritage Sites of Sunderbans in Bay of Bengal delta, famous for Royal Bengal Tigers, as well as Kaziranga National Park, famous for one horn rhino.
Global River cruise market:
- The global River cruise market has grown at ~5% over the last few years and is expected to constitute ~37% of cruise market by 2027. Europe has been driving growth with approx. 60% share of river cruise vessels in the world.
- In India, 8 river cruise vessels are operational between Kolkata and Varanasi while cruise movement is also operation on National Waterways 2 (Brahmaputra). Tourism activities like river rafting, camping, sightseeing, kayaking and so on are operation in many spots in the country.
- The construction of 10 passengers terminals across NW2 are going on which will further bolster the prospect of river cruise. At present, four river cruise vessels are operational in NW2 while it is operating in limited capacity in NW3 (West Coast Canal), NW8, NW 4, NW 87, NW 97, and NW 5.
- As the capital expenditure is pumped to build capacity in the inland waterways, the river cruise is set to grow further with systematic forward and backward linkage for the economy, especially across the banks of the rivers.
Way Forward:
- With support from the Inland Waterways Authority of India (IWAI) under Ministry of Shipping, Ports and Waterways (MoPSW), the success of MV Ganga Vilas cruise service is likely to enthuse entrepreneurs to explore river cruise in other parts of the country.
