DAILY NEWS ANALYSIS

The India–Australia Economic Cooperation and Trade Agreement has completed four years since its signing. Both countries now aim to build on this progress through strengthened collaboration and ambitious targets, including reaching AUD 100 billion in bilateral trade by 2030.

What is the India–Australia Economic Cooperation and Trade Agreement?

About

The India–Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA) is a landmark bilateral trade agreement between India and Australia. It was signed in April 2022 and ratified in November 2022. The agreement aims to deepen economic integration, boost bilateral trade, and enhance investment flows by reducing trade barriers and promoting services exchange.

Key Features of the Ind-Aus ECTA

Tariff Reductions

The agreement provides for significant tariff liberalization between the two countries. Australia can export over 85% of its goods to India tariff-free, which will increase to 90% by June 2026. In return, 96% of Indian exports to Australia are already tariff-free, and this will rise to 100% by 2026. This is important because it leads to lower costs of goods, improved competitiveness, and greater consumer benefits.

Access to Key Markets

The ECTA ensures preferential market access for both countries. India gains better access to Australia’s developed market, while Australia benefits from opportunities in India’s large and fast-growing market. Key sectors likely to benefit include gems and jewelry, textiles, leather, furniture, and agriculture, which are largely labor-intensive industries.

Services Trade

The agreement has extensive provisions in the services sector, covering 135 sub-sectors such as business services, communication, construction, and engineering. India has secured market access in 103 sub-sectors in Australia and has been granted Most Favoured Nation (MFN) status in 31 sub-sectors, strengthening its global services presence.

Pharmaceutical and IT Benefits

The ECTA offers major advantages to India’s pharmaceutical and IT sectors. It enables faster approval of medicines in Australia and removes double taxation for IT companies. These measures help in reducing operational costs and enhancing the global competitiveness of Indian firms.

Job Creation and Skill Exchange

The agreement is expected to create around 1 million jobs in India. It also opens opportunities for professionals such as yoga teachers and chefs. Additionally, nearly 100,000 Indian students will benefit from post-study work visa provisions, promoting skill development and knowledge exchange.

Geopolitical Importance

Beyond trade, the ECTA strengthens strategic and geopolitical ties between India and Australia. It enhances cooperation in key international frameworks such as the Quadrilateral Security Dialogue, Indo-Pacific Economic Framework for Prosperity, and Supply Chain Resilience Initiative. This reflects a shared commitment to economic resilience and stability in the Indo-Pacific region.

Bilateral Trade Post Signing of the Agreement

Since the signing of the India–Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA) in 2022, bilateral trade between India and Australia has shown strong growth. India’s exports to Australia have more than doubled, increasing from USD 4 billion in FY 2020–21 to USD 8.5 billion in FY 2024–25. During 2024–25, total bilateral trade reached USD 24.1 billion, while India’s exports grew by 8% compared to the previous year. However, in FY 2025–26, India’s total trade with Australia recorded USD 19.3 billion, reflecting market fluctuations and global economic trends.

Significance of Australia for India

Strategic Partner in the Indo-Pacific

Australia plays a crucial role in maintaining a free, open, and rules-based Indo-Pacific region, aligning closely with India’s maritime and regional security interests. Its cooperation strengthens India’s ability to ensure stability and security in the region.

Key Source of Critical Minerals and Energy

Australia is an important supplier of lithium, cobalt, rare earths, coal, and liquefied natural gas (LNG). These resources are vital for India’s energy security, industrial growth, and technological development, especially in the areas of batteries and renewable energy.

Trade and Economic Partner

Under the Ind-Aus ECTA (2022), bilateral trade is expanding due to reduced tariffs and improved market access. Negotiations are also underway for a broader Comprehensive Economic Cooperation Agreement (CECA), which could further enhance trade, investment, and economic collaboration.

Education and Research Hub

Australia is a major destination for Indian students. The two countries are also collaborating in STEM fields, innovation, and research, with agreements for mutual recognition of qualifications. This strengthens human capital and knowledge exchange.

Geopolitical Convergence

India and Australia maintain close cooperation in multilateral forums such as the Quadrilateral Security Dialogue, Indian Ocean Rim Association (IORA), and East Asia Summit (EAS). These partnerships help India diversify strategic relationships and balance China’s regional influence in the Indo-Pacific.

How Has Bilateral Trade Evolved Under the Ind-Aus ECTA?

Trade Surge

Since the India–Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA) came into effect, bilateral merchandise trade has more than doubled. Trade increased from USD 12.2 billion in 2020–21 to USD 26 billion in 2022–23, reflecting the strong impact of tariff reductions and improved market access. India’s exports to Australia continue to grow, recording a 14% increase, and in the first eight months of 2024, total merchandise trade reached USD 16.3 billion, showcasing a robust and expanding trade partnership.

Export and Import Utilization

The preferential import data exchange between India and Australia began in 2023, demonstrating effective implementation of the ECTA. So far, export utilization stands at 79%, while import utilization is slightly higher at 84%, indicating that both countries are actively leveraging the trade benefits under the agreement.

Sectoral Growth

Several key sectors have benefited significantly under the ECTA. Textiles, chemicals, and agriculture have seen strong growth due to preferential tariffs and market access. There has also been a diversification in exports, with new products such as gold studded with diamonds and turbojets gaining prominence in bilateral trade.

Raw Materials

India’s imports of raw materials from Australia, including metalliferous ores, cotton, and wood, have supported domestic industries and manufacturing. This highlights the complementary nature of the trade partnership, where Australia’s resource exports fuel India’s industrial growth while India provides manufactured goods and services in return.

Factors Propelling the Strengthening of India–Australia Bilateral Partnerships

1. Comprehensive Strategic Partnership (CSP) Framework (2020)

In June 2020, India and Australia elevated their relationship from a Strategic Partnership (initiated in 2009) to a Comprehensive Strategic Partnership (CSP). This created a broader and more structured platform for cooperation spanning defence, trade, education, climate, technology, and culture.
Over the last five years, the CSP has facilitated more than 32 high-level visits and deepened engagement at leadership levels, strengthening institutional links between the two countries.

2. Robust Defence and Security Cooperation

Defence ties have grown significantly, with regular naval, air, and land exercises such as AUSINDEX and Malabar, enhancing interoperability. India’s participation in Australia’s largest military exercise, “Talisman Sabre 2025”, further strengthened operational collaboration.
The Mutual Logistics Support Agreement (MLSA) allows reciprocal access to military facilities, improving logistics and maritime domain awareness.
The ‘2+2 Ministerial Dialogue’, held every two years, brings together Foreign and Defence Ministers from both countries to discuss strategic, defence, and regional security issues, reinforcing the CSP framework.

3. Economic and Trade Growth Enabled by ECTA

The India–Australia Economic Cooperation and Trade Agreement (ECTA), signed in April 2022 and ratified in November 2022, is a landmark trade deal driving bilateral economic integration.
It allows Australian businesses to export over 85% of goods to India tariff-free, increasing to 90% by January 2026, significantly boosting trade competitiveness.
According to the India Economic Strategy to 2035, Australian investments in India are projected to increase tenfold, reaching USD 100 billion by 2035, with key sectors including critical minerals, education, and technology.

4. Clean Energy and Climate Initiatives

The India-Australia Renewable Energy Partnership (REP), launched in 2024, focuses on eight cooperation areas, including solar PV, green hydrogen, battery storage, and circular economy solutions.
REP reduces reliance on China for critical renewable components and addresses vulnerabilities exposed by export restrictions and pandemic disruptions.
Both countries have aligned climate ambitions: India targets 500 GW of non-fossil electricity by 2030 (already at 50%), while Australia aims for 62–70% emissions reduction by 2035.

5. Education and Skill Development Cooperation

Australia hosted nearly 140,000 Indian students in 2024, making India the second largest source of international students.
The establishment of Australian foreign branch campuses in India is expanding educational exchanges.
Joint skill development initiatives, such as training solar rooftop technicians, focus on empowering youth and women. Under REP, the India-Australia Rooftop Solar Training Academy will train 2,000 technicians by 2027, promoting employment and technical expertise.

6. Science, Technology, and Innovation Collaboration

The Australia-India Strategic Research Fund supports joint projects in science, clean energy, critical minerals, and digital research.
The countries collaborate on space technologies, including satellite launches and data-sharing initiatives.
REP innovation challenges encourage the commercialisation of renewable technologies, supporting smart grids, green hydrogen, and energy storage solutions.
The Australia-India Green Steel Partnership promotes India’s steel demand while advancing efficient and sustainable production technologies.

7. People-to-People and Cultural Ties

The Indian diaspora in Australia plays an active role in strengthening bilateral ties through business, cultural, and academic links.
Education is Australia’s largest service export to India, valued at USD 4.4 billion (2022).
Indian culture, including cuisine, festivals, and Bollywood, contributes to Australia’s multicultural vibrancy.
Initiatives such as the Australia India Institute and India Australia Friendship Association foster mutual understanding, research collaborations, and educational exchanges.

Key Challenges Hindering India–Australia Bilateral Cooperation

1. Overdependence on China in Supply Chains

Both India and Australia are highly dependent on China for critical renewable energy materials and components. China accounts for nearly 70% of global rare earth mining and about 90% of rare earth processing.

• India sources around 15% of total imports from China, including electrical machinery, pharmaceutical ingredients, and battery materials.

• More than 90% of Australia’s imported solar panels come from China, and around 80% of total panels used in Australia are Chinese-made.

This dependence creates strategic vulnerabilities. For example, China’s rare earth export restrictions in 2020 disrupted Indian electric vehicle production, halving output in some cases.
Efforts like the trilateral Supply Chain Resilience Initiative with Japan aim to diversify sources and reduce reliance on China, highlighting the urgency of this challenge.

2. Limited Downstream Manufacturing

Australia primarily exports raw minerals such as lithium, cobalt, and rare earths but lacks large-scale refining and manufacturing capacity.

• This limits Australia’s ability to capture full economic value and participate in high-end renewable technology manufacturing, constraining industrial synergies with India’s manufacturing sector.

• For example, despite being the world’s largest lithium producer, Australia still imports many finished battery components, while India’s PLI schemes aim to develop domestic production chains.

3. Regulatory, Certification, and Policy Alignment Issues

Divergent standards and regulations between India and Australia can obstruct smooth trade in renewable technologies and critical minerals.

• Investors often prefer markets with harmonized regulations, such as the EU or the U.S., limiting investment enthusiasm in India-Australia projects.

• Harmonizing certification for solar panels, green hydrogen, and battery technologies remains a work in progress, requiring concerted diplomatic and industry efforts.

4. Geopolitical and Strategic Differences

India’s strategic defence ties with Russia and its non-alignment stance sometimes contrast with Australia’s alignment with the U.S. and Western defence coalitions.

• This divergence leads to cautious approaches in technology transfers, especially in defence and high-tech sectors.

• However, growing alignment over Indo-Pacific security and joint exercises like Malabar are gradually mitigating these challenges, reflecting increasing strategic convergence.

5. Trade Imbalance and Dependence on Raw Material Exports

India’s imports from Australia are heavily coal-dependent, accounting for over 80% of Australia’s exports to India, creating a trade imbalance.

• This imbalance can conflict with the mutual goal of sustainable development and cleaner energy.

• While efforts are underway to diversify trade baskets, non-tariff barriers, tariffs, and procedural bottlenecks continue to constrain Indian exports, particularly for MSMEs.

6. Talent Mismatch and Skill Certification Challenges

India provides a large, cost-effective skilled workforce, but not all skills currently meet Australian industry standards and certification requirements.

• Initiatives like the Solar Rooftop Technician training program aim to address these gaps.

• However, scaling such programs to achieve high-quality, accredited standards across sectors is challenging.

• Language barriers and differences in accreditation systems also limit workforce mobility and mutual recognition of skills.

Conclusion

As Australian Foreign Minister Penny Wong aptly noted, “the India–Australia partnership is particularly important at a time when the global order is undergoing significant transformation.”

Moving forward, both countries should focus on:

• Deepening defence cooperation to strengthen regional security and interoperability.

• Expanding trade agreements to boost bilateral commerce and diversify trade baskets.

• Advancing clean energy collaboration, including renewable energy, green hydrogen, and sustainable technologies.

• Harmonising regulations to facilitate smoother trade, investment, and technological cooperation.

Sustained, practical, and high-level engagement will enable India and Australia to jointly lead in shaping a resilient, secure, and prosperous Indo-Pacific region, ensuring that the bilateral partnership delivers strategic, economic, and societal benefits for both nations.