India, explained.
Strong domestic constituencies on both sides saw areas cut from the 2022 deal (Behnam Norouzi/Unsplash)
India and Australia’s trade deal remains half-finished
Economic integration hasn't kept pace with geopolitical convergence.
India, explained.
Strong domestic constituencies on both sides saw areas cut from the 2022 deal (Behnam Norouzi/Unsplash)
Economic integration hasn't kept pace with geopolitical convergence.
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India and Australia’s trade deal remains half-finishedIndia and Australia’s trade deal remains half-finished
India’s trade diplomacy is gaining momentum. Having recalibrated by striking deals with the European Union and the United States, one relationship remains under-leveraged: the India–Australia economic partnership.
This gap is all the more notable given the depth of convergence between the two countries with a shared outlook on maintaining a stable and open Indo-Pacific. Although security and diplomatic cooperation have strengthened rapidly, economic integration has not kept pace with geopolitical alignment.
In April 2022, India and Australia signed the Australia–India Economic Cooperation and Trade Agreement (ECTA), which entered into force in December that year. Under the ECTA, tariffs on over 85% of Australian goods exports to India by value were eliminated on entry into force, with further tariff reductions phased in over time. Around 96% of Indian goods imports into Australia became duty-free. It was a significant breakthrough after years of stalled negotiations, which showed renewed political will on both sides.
Early outcomes suggest that ECTA has begun to unlock trade potential, particularly in agricultural exports. But the agreement remains a partial arrangement. It does not address services liberalisation, investment protection, regulatory cooperation, or labour mobility. In this regard, ECTA should be seen as an interim foundation for a more comprehensive framework that could address non-tariff barriers, improving regulatory transparency, and facilitating greater investment flows.
When global trade governance faces fragmentation and protectionist pressures are reasserting themselves, a deeper India–Australia economic agreement would stand as a shared commitment to open, rules-based trade.
The failure to conclude a comprehensive trade deal despite negotiations stretching back to 2011 was because of the structural and political constraints rather than a lack of rationale. At various points, India’s trade priorities lay elsewhere. Much of the last decade was shaped by India’s engagement with larger multilateral initiatives, particularly the Regional Comprehensive Economic Partnership (RCEP). India’s eventual withdrawal from RCEP in 2019 reflected a broader preference for selective and calibrated integration. This caution inevitably slowed progress on bilateral agreements, including with Australia until the 2022 partial free trade agreement.
Moreover, domestic political sensitivities also loomed large. Agriculture proved to be a persistent sticking point, especially dairy and wine tariffs, sectors with strong domestic constituencies on both sides of the issue. These challenges were hardly unique to India–Australia negotiations, but they were sufficient to stall momentum in the absence of strong political incentives to push through a comprehensive deal.
India’s broader approach to trade liberalisation further contributed to delays. Concerns about protecting vulnerable domestic producers and managing trade imbalances shaped New Delhi’s negotiating posture, which favoured incremental agreements over ambitious frameworks. Although pragmatic, this approach meant that India’s economic engagement often lagged behind its broader partnerships.
India and Australia possess highly complementary economic structures that remain underexploited. India’s expanding manufacturing base and globally competitive services sector align well with Australia’s strengths in resources, agriculture, education, and advanced services. Stronger liberalisation could unlock value across sectors such as pharmaceuticals, education, tourism, digital services, and clean energy. Beyond bilateral economics, both countries are influential middle powers with growing stakes in shaping regional economic norms. When global trade governance faces fragmentation and protectionist pressures are reasserting themselves, a deeper India–Australia economic agreement would stand as a shared commitment to open, rules-based trade. Stronger economic ties could support more resilient supply chains, cooperation on critical minerals, alignment on technology and digital trade standards, and increased two-way investment, all of which have commercial significance in a region of heightened contest.
Australia’s role as a key supplier of critical minerals such as lithium and rare earths aligns closely with India’s ambitions in clean energy, electric mobility, and strategic manufacturing. A comprehensive economic agreement could provide the institutional framework to coordinate these priorities – reducing vulnerabilities, diversifying dependencies, and embedding economic cooperation within a broader Indo-Pacific strategy.
Another underdeveloped pillar of the India–Australia economic relationship is skills mobility, particularly in services. India’s strength in IT, healthcare, education, and professional services complements Australia’s demand for skilled labour across sectors facing demographic and workforce constraints. Even though ECTA made limited progress on this front, a comprehensive agreement could expand mutual recognition of qualifications, streamline temporary mobility pathways, and create clearer frameworks for services trade. Beyond economic gains, greater skills mobility would strengthen institutional and people-to-people links, anchoring the partnership in everyday economic interactions
This prospect of a larger deal is on the agenda. Geopolitical alignments and changing regional dynamics have converged to create a compelling window for action. This would unlock tangible economic gains and anchor India–Australia cooperation in the Indo-Pacific’s emerging economic architecture. For two middle powers seeking to translate convergence into durable regional influence, the case for moving beyond ECTA makes itself.
About the author
Sanchari Ghosh
Sanchari Ghosh is a PhD candidate at the Department of International Relations, Jadavpur University, Kolkata.
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