India-Australia trade gap narrows by 15% with FTA
NEW DELHI : 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. 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.
India’s coal import from January to May fell 45%, driven by lower demand this year than last year when India witnessed heat waves that drove electricity generation and power demand to a record. Besides, coal prices have also declined in 2023 from the previous year due to weaker demand in China, the world’s largest coal consumer.
The Russia-Ukraine war disrupted global supply chains in 2022, leading to a surge in energy prices. While coal imports from Australia in the five months to May declined by 34% in value, they fell by
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