Ruqayyah Snyder
India and Australia have a history of bilateral trade, with Australia exporting coal, gold, and gas to India, and India exporting chemicals, machinery, and pharmaceuticals to Australia. In 2022, the two countries signed the Economic Cooperation and Trade Agreement (ECTA), which aimed to strengthen their trade relationship and provide new market access opportunities for businesses and consumers. This agreement has led to a significant increase in bilateral trade, with Australia's exports to India rising by 50% and industrial exports by 30%. India is now Australia's 9th largest trading partner, while Australia is India's 13th largest trading partner. Both countries continue to work towards improving their economic ties, with Australia investing in an Australia-India Trade and Investment Accelerator Fund to further boost trade opportunities.
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What You'll Learn
The Australia-India Economic Cooperation and Trade Agreement (ECTA)
India and Australia have a history of bilateral trade, which has been limited to a range of mineral commodities, such as coal. However, the Australia-India Economic Cooperation and Trade Agreement (ECTA) was signed in 2022, which promises to strengthen trade relations between the two countries.
The ECTA came into force on 29 December 2022, and under this agreement, over 85% of Australian goods exports by value to India are tariff-free, increasing to 90% by 1 January 2026. Similarly, 96% of imports from India are now tariff-free, rising to 100% by 1 January 2026. This reduction in tariffs is expected to save Australian businesses up to $2 billion by the end of the year.
The agreement also helps secure access to the fast-growing Indian market of over 1.4 billion people, providing Australian businesses with opportunities for trade diversification. India's economy is projected to become the third-largest in the world by 2030, and Australia aims to maximise the trade and investment opportunities that come with this growth.
The Australian government has identified four 'superhighways of growth' in sectors where the country has a competitive advantage: clean energy, education and skills, agribusiness, and tourism. Additionally, there are nearly 50 specific opportunities to accelerate engagement in areas such as defence industries, sports, culture, space, and technology.
The ECTA is also expected to benefit Australia by diversifying export destinations, developing new supply chain partners, and reducing dependence on traditional trade partners. Furthermore, it will promote stronger social and political bonds between the two countries.
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Bilateral trade
India and Australia have a history of bilateral trade, with Australia being a stable, democratic, and culturally diverse nation with a highly skilled workforce and one of the strongest performing economies in the world. In 2020, India was Australia's 6th largest export partner and the 11th largest import partner. In FY23, India was Australia's 9th largest trading partner, and Australia was India's 13th largest trading partner.
The ECTA agreement, which came into effect on December 29, 2022, covers most tariff lines dealt with by India and Australia. Over 85% of Australian goods exports by value to India are now tariff-free, rising to 90% by January 1, 2026, and high tariffs have been reduced on some agricultural products. This has resulted in a surge of bilateral merchandise trade from US$12.2 billion in 2020-21 to US$26 billion in 2022-23, with a strong performance in the current fiscal year, reaching US$16.3 billion by November 2024.
The agreement has particularly benefited Australian agricultural exports, which have increased by 50% since the agreement came into force. Products such as sheep meat, seafood, broad beans, citrus fruits, and almonds have seen massive boosts. Industrial exports to India have also increased by around 30%, with pharmaceuticals, wood, paper, and cochlear implants leading the way.
In addition to the economic benefits, strengthening trade relations with India is expected to promote stronger social and political bonds between the two countries and advance their shared interest in a peaceful, stable, and prosperous Indo-Pacific region.
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Benefits of trade for Australia
India and Australia have a history of bilateral trade, which has been limited to a range of mineral commodities such as coal. However, the implementation of the Economic Cooperation and Trade Agreement (ECTA) in 2022 promises to diversify and strengthen trade relations between the two countries.
Market Access
The ECTA provides Australian businesses with access to the fast-growing Indian market of over 1.4 billion people. This agreement covers almost all tariff lines dealt with by India and Australia, with over 85% of Australian goods exports to India being tariff-free, increasing to 90% by 2026. This market access is expected to increase bilateral trade from US$27.5 billion to US$45 billion in five years.
Trade Diversification
The trade agreement with India helps Australia diversify its export destinations and reduce dependence on traditional trade partners. Australia's exports to India include coal, gold, gas, and agricultural products, which do not directly compete with Indian producers.
Supply Chain Resilience
Developing new supply chain partners through trade with India adds diversification and resilience to Australia's supply chains. India's exports of chemicals, machinery, and pharmaceuticals provide much-needed inputs for Australian industries.
Economic Growth and Job Creation
Boosting economic ties with India is expected to create more jobs and opportunities for Australians, contributing to the country's economic growth and prosperity. The free trade agreement has already saved Australian businesses hundreds of millions of dollars and is projected to save exporters around $2 billion in tariffs annually.
Social and Cultural Exchange
The ECTA includes mobility outcomes that foster people-to-people links and contribute to cultural exchange between the two countries. It provides visa pathway clarity for Australian businesses and professionals seeking opportunities in India, supporting outward mobility and streamlining the recognition of qualifications and licensing procedures.
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Benefits of trade for India
India and Australia have a history of bilateral trade, which has been limited to a range of mineral commodities such as coal. However, the signing of the Economic Cooperation and Trade Agreement (ECTA) in 2022 has boosted trade relations between the two countries. As a result, over 85% of Australian goods exports to India are now tariff-free, with the number rising to 90% by 2026. Similarly, 96% of imports from India are now tariff-free, increasing to 100% by 2026. This has opened up access to the fast-growing Indian market of over 1.4 billion people, providing several benefits for India.
Firstly, the agreement has helped strengthen India's trade profile and provided a platform for further expansion. Australia's small economy and limited scale mean it won't significantly disrupt Indian producers, especially in the highly protected agriculture sector. Instead, Australian agricultural exports target the high-end market in India, complementing Indian production.
Secondly, the trade agreement has helped diversify India's export destinations and supply chain partners. India's exports of chemicals, machinery, and pharmaceuticals to Australia provide much-needed inputs for Australian industries, adding diversification and resilience to their supply chains.
Thirdly, the ECTA has positively impacted bilateral services trade, with Australian exporters gaining full or partial access to over 85 Indian service sectors. This has improved market access for sectors such as education, business services, research and development, financial services, and healthcare and tourism. As a result, Australian services exports to India nearly doubled to $10 billion in 2023.
Finally, the agreement has helped save costs for Indian importers. For instance, Indian businesses and households saved over $145 million in duties for automotive, electrical components, household goods, and textiles. The trade agreement has also helped save Australian businesses hundreds of millions of dollars in tariffs, reducing costs for Australian consumers and creating local jobs.
In conclusion, the Australia-India Economic Cooperation and Trade Agreement has provided several benefits for India, including strengthening its trade profile, diversifying export destinations, improving market access for services, and reducing costs for importers and exporters.
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The future of Australia-India trade
India and Australia have a history of bilateral trade, which has been limited to a range of mineral commodities, such as coal, gold, and natural gas. However, the recent signing of the India-Australia Economic Cooperation and Trade Agreement (ECTA) in 2022 promises to strengthen their trade relationship and open up new opportunities for both countries.
Under the ECTA, over 85% of Australian goods exports to India are now tariff-free, with plans to increase this to 90% by 2026. This agreement provides Australian businesses with access to India's fast-growing market of over 1.4 billion people and allows for trade diversification. India's exports to Australia have also seen significant growth, particularly in the automotive, textile, chemical, machinery, and pharmaceutical sectors.
The complementary nature of the two economies is advantageous. Australia's coal, gold, and gas support India's industrialization, while India's exports of chemicals and machinery provide essential inputs for Australian industries. Additionally, Australia is the world's largest producer of lithium, which is crucial for India's electric vehicle (EV) manufacturing ambitions.
Looking ahead, the Australian government has launched "A New Roadmap for Australia's Economic Engagement with India", aiming to maximize trade opportunities, boost two-way investment, and strengthen supply chains. This roadmap identifies key sectors for growth, including clean energy, education, agribusiness, and tourism. With India's economy projected to become the third-largest in the world by 2030, the future of Australia-India trade looks promising, offering benefits to businesses and consumers in both countries.
Furthermore, the Australia-India Trade and Investment Accelerator Fund, with an investment of $16 million, will help Australian businesses unlock new commercial opportunities in India. The Maitri ('friendship') Grants program, with an additional $4 million in funding, will enhance cultural links and business-to-business relationships. These initiatives demonstrate the commitment of both countries to fostering a strong and mutually beneficial trade relationship.
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Frequently asked questions
Yes, the two countries have a history of cooperation and trade.
The India-Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA or AI-ECTA) was signed virtually on April 2, 2022, and came into force on December 29, 2022.
India's major exports to Australia include petroleum products, engineering goods, pharmaceuticals, textiles, and gems and jewellery. There is also trade in critical minerals, broadcasting, defence, and education.
Bilateral trade between the two countries stood at US$24.1 billion in FY24 and US$25.9 billion in FY23. India's exports to Australia were US$7.94 billion in FY24 and US$4.92 million from April-October FY25.
The trade agreement has opened up new opportunities for businesses in both countries, and the Indian government is committed to sustaining this momentum through innovative initiatives. Australia has a competitive advantage in India across multiple sectors, and there is a growing demand for Australian goods in India's emerging middle class.
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