Trade & investment, explained.
Hilary Wardhaugh/Getty Images
A bilateral investment treaty can protect Australian capital in India, an economic cooperation agreement must make the resulting businesses viable.
Subscribe to The Informer for monthly expert analysis, and to Events for advance notice of visiting world leaders and distinguished guests.
You may unsubscribe from Lowy Institute newsletters at any time. For information on our privacy practices and how to unsubscribe, see our Privacy Policy.
Australia and India need a treaty and a trade dealAustralia and India need a treaty and a trade deal
On 25 September, Indian Commerce and Industry Minister Piyush Goyal said Australia and India were pursuing a bilateral investment treaty (Opens in new window) (BIT), alongside a comprehensive economic cooperation agreement (CECA). These negotiations reopen an unfinished question: how can the two countries protect investment while helping their businesses produce together?
The BIT should provide credible protection for capital; CECA should make the resulting businesses viable. That means connecting Australian resources, processing, and technology with Indian manufacturing, under rules that allow both countries to gain capabilities and commercial returns.
The Sicona–Himadri partnership (Opens in new window) shows the possibilities. In May 2025, Himadri committed A$15 million to Wollongong battery company Sicona alongside a licence to manufacture its silicon-carbon anode technology in India. Indian capital would support Australian pilot operations; Indian production offered prospective royalties. Each country could benefit from the other’s industrial development.
The rules protecting such investments have changed. The 1999 Agreement on the Promotion and Protection of Investments (Opens in new window), effective from May 2000, promised fair and equitable treatment, compensation for expropriation, and transfers of investment funds. It also allowed investors to bring claims against the host government through international arbitration. These were enforceable commitments about how capital would be treated.
The challenge is that both governments want more production at home.
The consequences became clear in 2011, when Australian company White Industries won a claim (Opens in new window) against India after Indian courts took nine years to resolve efforts to enforce a commercial arbitration award. A clause promising treatment no less favourable than that given to third-country investors allowed the tribunal to draw stronger protection for legal remedies from India’s treaty with Kuwait. India’s Law Commission later linked (Opens in new window) this award and other investor claims to the rethink of its treaty program.
India’s government argued (Opens in new window) that older treaty language invited broad and ambiguous interpretations. Its revised model, approved in December 2015, generally required investors to pursue domestic remedies, for at least five years, before arbitration and excluded areas including taxation, subsidies, and procurement. India then moved to terminate and renegotiate older agreements (Opens in new window). Ending the Australian treaty was part of that wider policy overhaul.
The legacy remains. Termination took effect on 23 March 2017 (Opens in new window), but a fifteen-year survival clause preserves protection for eligible investments made before that date until March 2032. Later investments cannot rely on the old treaty. Domestic law and contractual rights remain available, but investors have different bilateral treaty protections depending on when they invested. For a new factory, that changes the remedies available if government action harms the investment. A replacement must address that gap.
Doing so requires credible remedies alongside clear protection for legitimate regulation. Australia also opposes investor–state arbitration in new trade agreements (Opens in new window), making enforcement a central negotiating question. The new treaty should define investor rights, regulatory exceptions, and dispute procedures precisely. But even sound protections cannot guarantee customers, product approvals, or eligibility for industrial support. That is where CECA becomes essential.
Sideline talks in July during ASEAN meetings between Indian External Affairs Minister Dr S. Jaishankar and Australian Foreign Minister Penny Wong (Daniel Walding/DFAT)
The challenge is that both governments want more production at home. Australia’s critical minerals tax incentive (Opens in new window) will support eligible domestic processing from July 2027. India’s advanced chemistry cell incentive (Opens in new window) requires 60% domestic value addition within five years. Shared strategic interests therefore coexist with potentially competing preferences over where factories and jobs should be located.
Tariff preferences do not settle that competition. Under the existing Economic Cooperation and Trade Agreement (ECTA), Australian-originating inputs (Opens in new window) used in Indian production can count towards bilateral origin, but not automatically towards Indian domestic content under an incentive scheme. India’s procurement rules (Opens in new window) also ordinarily exclude overseas royalties from local-content calculations. A product can qualify for lower tariffs while its producer faces separate tests for subsidies or public contracts.
Even a qualifying product still needs regulatory approval. ECTA provides for acceptance of the other country’s testing and certification results (Opens in new window) only “whenever possible”, subject to equivalent assurance. Investors must therefore establish both whether their products receive preferential treatment and whether they can reach customers.
CECA should tackle these conditions together, using prospective battery and minerals projects to identify practical obstacles. It should clarify the production steps and imported inputs that qualify goods for tariff preferences. With procurement already under negotiation (Opens in new window), governments should specify covered buyers, products, and treatment of jointly produced goods. Changes to manufacturing-incentive eligibility require separate, explicit commitments.
That access must be supported by recognised laboratories, acceptance of specified test results, and clear certification timelines. Coordinated project approvals should preserve security and environmental safeguards while making compliance predictable. Firms would still need to prove their technologies, finance production, and secure buyers.
The earlier treaty’s history shows why protection must be carefully designed. Partnerships such as Sicona–Himadri show what better rules could enable. The BIT should give firms confidence to commit capital; CECA should help turn that capital into production that creates lasting gains in both countries.
About the author
Simran Keshwani
Dr Simran Keshwani is a political economist & the Founder and Research Lead of IndiaForth, a Sydney-based strategic intelligence advisory firm focused on India’s bilateral relationships with the world, and its global rise.
The most-pressing world events explained by Lowy Institute experts and global contributors, in your inbox, every Thursday.
You may unsubscribe from The Interpreter at any time. For information on our privacy practices and how to unsubscribe, see our Privacy Policy.
