In a first, India and Australia last week signed an Economic Cooperation and Trade Agreement (ECTA) that aims to double the bilateral trade between the two countries in the next five years! How will it impact the investors? Read to know!
The deal between the two countries is strategic as it is the first trade pact with a developed economy after 15 years. It aims to take the bilateral trade from $27 billion to $45-50 billion five years down the line!
“This is a watershed moment for our bilateral relations. On the basis of this agreement, together, we will be able to increase the resilience of supply chains and also contribute to the stability of the Indo-Pacific region,” PM Modi said.
Benefits for India and Australia
From India’s standpoint, it will get duty-free access to Australia on 96.4% of the exports. Beneficiaries of these include textiles, leather, furniture, sports goods, and jewellery. Also, the remaining 113 tariff lines will start to attract zero duties in a phased manner.
For Australia, 85% of their exports to India will attract nil duty. No or low duty will be levied on 30.3% tariff lines in 3-10 years.
What’s In It For The Stock Markets?
The stock markets cheered the move by inching up 2% on Monday (April 04, 2022), after the deal was signed over the weekend.
As a part of the deal, no such sector has been opened for Australia, where India can face a problem domestically. India has kept many sensitive products in the pact without offering any concessions. The deal will also help create 10 lakh jobs in the next five years.
Also, Indian and Australian companies will be able to bid on each other’s central government tenders!
How Will it Impact Investors?
Job creation on a large scale due to the deal will help people increase their incomes, which will spur spending. This will lead to demand creation in the economy.
Also, the pact will help in increasing bilateral trade without hurting domestic industries, which is a balanced approach. No wonder why investors lauded the move through their stock market actions on Monday!