India is in the throes of negotiating free trade agreements (FTAs) with five countries, having successfully closed about 15 similar regional and bilateral trade agreements over the last five years. Dozens more are in the hallway, patiently awaiting their turn. What’s the rush? India has long been cautious in opening up its market, and apart from often quoting the experience of the East India Company turning into the Raj, in truth sovereign India has never been particularly keen on initiating and accelerating this global ambition that requires it to plan long term, spur on its businesses and keep track of arcane factor endowments and utilization rate statistics. Most trade is enterprise-driven, not state driven.
Those perceptions have undergone a significant change over the last decade, opening India to new possibilities. It had much to do with China. One example is the changed lens of trading nations like Australia for whom India had been a peripheral player save for the large number of Indian students its universities hosted. China’s rise as a dominant global commercial player, its regional aggression and Australia’s growing export concentration on that country, coupled with concerns over foreign interference, made distant India appear more relevant to Canberra’s strategic aims. Consequently, Australia began to explore ways of doing business with India, and with typical Australian pragmatism, asked India what it’s needs were, rather than made demands on India. An examination of how the agreement was achieved is a study in patience and determination.
Australia had been negotiating a free trade agreement with India since 2011, with little progress. However, a detailed Australian report published in 2018 An India Economic Strategy to 2035 laid it out when it stated that “no market over the next 20 years offers more growth opportunities for Australian business than India.” It envisaged a 10-fold increase in Australian investment into India to $100 billion by 2035. The decision of Prime Minister Scott Morrison, to call out China on Covid and its aggressive behaviour, made India the logical friend to turn to.
Australia and India make for natural trading partners based on their respective factor endowments. Australia has a comparative wealth of mineral resources and agricultural commodities, while India’s strength is in services and labour intensive manufacturing. There is convergence in fintech and niche technologies like cyber security. However, Australian businesses never fully explored the Indian market, with perceptions of India being stereotypical, and not entirely untrue: a largely inward oriented economy with a plethora of business regulations at national and state levels. India was a country they put in the “too hard” basket. Indian business saw the Australian market as small, highly regulated and distant.
For Prime Minister Modi, with his stress on the Make in India programme seeking to create 100 million jobs by 2035, and fulfilling massive infrastructure, manufacturing, technology and energy needs, it was necessary to have high quality FDI and a trusted partner for natural resources. Australia fit the bill.
PM Modi and PM Scott Morrison transformed the relationship, elevating it to a Comprehensive Strategic Partnership in 2020. This enabled plurilateral and trilateral cooperation across sectors, including education, agriculture, science, technology, defence and energy. A series of agreements were reached, for example in migration and mobility, and renewable energy technologies.
As the time drew near for the agreement to be signed, the bonhomie between the two prime ministers filtered down to their ministers and negotiators, particularly Commerce Ministers Piyush Goyal and Dan Tehan who picked up the negotiations in earnest. This resulted in an understanding that the desired elements for bilateral trade would not be possible to include in one agreement. And so it was agreed to break up the agreement, to achieve what was possible in the short term and prepare in the longer term for the more difficult discussions. India was moving with trust, and Australia was keen to gain the first-mover advantage.
That’s how the two-part agreement was born, the first part being the Economic Cooperation and Trade Agreement (ECTA) covering areas considered delicate – wine, wool, coal, construction, student work visas, mutual recognition for services (from chartered accountants to yoga instructors), tourism and logistics. And the second part later on, the full Comprehensive Economic Cooperation Agreement (CECA), to address the more difficult portions: agricultural goods such as dairy and foodgrains, environmental and education services, government procurement, digital trade, etc.
Since 29 December 2022, when the ECTA entered into force, 96% of Australian imports from India became tariff-free; this will rise to 100% in four years. The ECTA gives 85% of Australian goods zero-duty access to the Indian market, from coal to wool to meat to fruits, much in demand in India. It will be 90 % by 2026. Ditto with Australian wine, whose tariffs will reduce over time. For India, which has 122,000 students in Australia, those in the maths, technology and science fields receive extended post-study work visas, with a bonus year of stay, plus visas to 1,000 young Indians to pursue “working holidays” during which they can travel and work, an arrangement currently offered only to Americans and Europeans. In vocational services, 1,800 Indian traditional chefs and yoga teachers are allowed to enter and work in Australia annually as contractual service providers.
A major breakthrough was the elimination of double taxation for the Indian IT industry – a problem that it faces in other Page 7 of 7 geographies. Most importantly, both agreed to recognize each other’s degrees, in specific areas such as nursing, architecture, physiotherapy and other services. The sensitive Mutual Recognition Agreements, as they are known, were pragmatically done through Side Letters, ensuring further attention and elaboration.
How has the agreement done so far? Very well. In the first year of the ECTA, 79% of Indian exports to Australia and 84% of Australia’s exports to India were conducted through the agreement’s arches. This is in line with India’s increasing exports to Australia, up 66% in the last five years, nearly twice the 37% growth in the country’s global exports. This will accelerate, even as the two countries are currently working together to undertake due diligence on selected battery minerals projects in Australia to support India’s ambition to secure the supply of these resources.
What’s next? Negotiations for the complete CECA are underway, and include collaboration in the space sector, as also government procurement.
The agreement has attracted the attention of other countries, which now want similar trade terms with India – that’s why the long line in the FTA hallway. It may not be possible to replicate. Australia is unique, in that it has the most FTAs than any other country – 18 – even more than the U.S. and the EU, “a testament to the diplomatic skills of Australian trade negotiators, renowned for their pragmatic approach [which] relies on leaving tricky issues…outside the scope,” according to an analysis by the Australian Institute of International Affairs.
The trade agreement proffered by Australia to India then, has begun to bring India out of disenchantment with FTAs due to its earlier experience. India has quickly begun to reform its inward investment regulatory regime in areas from mining to healthcare and finance, and abolished retrospective taxation.
Perhaps Australia’s famed pragmatism is virtuously rubbing off on New Delhi.
Amb. Anil Wadhwa is the Former Secretary (East), Ministry of External Affairs, Government of India.
Manjeet Kripalani is the Executive Director, Gateway House.
This article was exclusively written for Gateway House: Indian Council on Global Relations. You can read more exclusive content here.
Support our work here.
For permission to republish, please contact outreach@gatewayhouse.in.
©Copyright 2025 Gateway House: Indian Council on Global Relations. All rights reserved. Any unauthorised copying or reproduction is strictly prohibited.