India-Australia trade gap narrows by 15% with FTA

The India-Australia interim free trade agreement (FTA), in place for six months, has led to a 15% narrowing of India’s trade deficit with Australia on increased exports of drugs, electrical machinery, and iron and steel articles, along with a significant decline in coal imports due to a milder Indian summer.

- Ravi Dutta Mishra & Dilasha Seth

India’s exports to Australia fell by over 32% in the five months to May compared to the year-ago period, while imports shrank by 25%, resulting in a narrowed trade gap of $3.87 billion, representing a 15% decline from the previous year, according to official data.

Excluding the energy basket, such as oil and coal, from the trade data reveals that India’s exports rose by 3.3% during the period, while imports saw a significant decline of 31%, resulting in a narrowed trade gap of $3.27 billion, marking a 41% decrease from the year earlier.

Coal imports account for 75% of total shipments from Australia, while oil exports account for 38% of India’s total exports to Australia. India’s merchandise imports from Australia consist largely of raw materials, minerals, and intermediate goods. Under the trade agreement with Australia, India removed the 2.5% import duty on high-grade Australian coal.