A Historic Win for Australian Businesses as Free Trade Deal is Signed With India

April 6th, 2022

Australia has signed a free trade agreement with India after nearly a decade of negotiations. The Australia-India Comprehensive Economic Cooperation Agreement will reduce Australia’s trade dependence on China — which is currently our largest trading partner by far — by opening up additional supply chain channels. 

India has the world’s second-largest population, so it’s another massive potential market for Australian goods and services. Over 1.3 billion people live in India, and it has a rapidly expanding middle class that can increasingly afford more goods and services. 

To put its population in perspective, India has more than 50 times the population of Australia!

Current Australia/India trade relations

Two-way trade between Australia and India is currently worth more than $24 billion per year. It has been growing strongly year on year prior to the free trade agreement, and should increase significantly as a result of the deal. 

India is Australia’s sixth-largest export market at the moment. The federal government’s goal is for India to be in our three largest export markets by 2035 due to the impact of the free trade deal.

Key aspects of the Australia/India free trade deal

The agreement will cut tariffs on 85% of Australian exports to India, including:

  • coal,
  • sheep meat,
  • wool,
  • lobsters,
  • lentils, and
  • rare earth minerals such as coal, gas and copper.

Tariffs on wine and a range of agricultural products will also be progressively phased out. 

Reducing tariffs will make the price of Australian goods and services cheaper and more competitive in the massive Indian market. However, products that are excluded from the deal include chickpeas and dairy, as both countries are significant producers of both products.

Tariffs will also be removed from most Indian imports into Australia as part of the deal, including:

  • textiles,
  • leather goods,
  • furniture,
  • jewellery, and
  • machinery.

How you can capitalise on the Australia/India free trade deal

According to Austrade, Australian businesses looking to sell their goods and services to India should look at one or more of the following options:

  • appointing agents and distributors, and
  • setting up branch offices, joint ventures or local subsidiaries.

Finance is likely to be necessary for any Australian business that gains a foothold in the Indian market to ramp up production capacity and ensure ongoing cash flow. Viable finance options could include:

  • Asset Finance, and
  • invoice finance (which allows you to receive early payment for your customers’ unpaid invoices), 
  • In addition foreign exchange finance solutions to facilitate trade and reduce currency payment risk. 

Similarly, Australian businesses looking to import cheaper, tariff-free goods from India after the trade deal may be able to benefit from:

  • Trade Finance to pay suppliers upfront without eating into valuable working capital. It is offered together with Invoice Finance to bridge the gap between paying the suppliers and receiving the payment from customers.
  • Foreign exchange solutions.

What Australian industries do this impact?

Australian wholesalers and manufacturers are two of the industries this deal will likely have the biggest impact on. 

For manufacturers, it means purchasing equipment from India will be cheaper and easier, which is very welcomed after all the supply chain issues of late. Wholesalers should have a similar experience to manufacturers, easing distribution channel issues

The bottom line

The Australia/India free trade deal could be a game-changer for businesses that are the quickest to capitalise on the new opportunities it presents. Don’t let a lack of finance hold your business back from fully exploring and exploiting opportunities to grow by tapping into the world’s second-largest population. Earlypay’s finance solutions may be the help you need for importing or exporting.

If you’d like to learn more about how Finance can provide cash flow for importing or exporting, please contact us on 1300 760 205.

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