Three years on, India-Australia trade deal sees high use, but modest gains
New Delhi, Nov 11, 2025
With high levels of saturation, India is now looking to convert the interim deal into a comprehensive trade agreement that will include new-age trade issues left out in the first round
Announcing the interim trade deal between India and Australia on December 29, 2022, Commerce and Industry Minister Piyush Goyal likened it to an agreement negotiated with the ‘speed of Brett Lee and the perfection of Sachin Tendulkar’ – highlighting the pace and precision with which the pact was sealed.
The interim trade deal, officially known as the India-Australia Economic Cooperation and Trade Agreement (Ecta) holds a special place for Goyal. It was India’s first agreement with a developed country in over a decade, and came shortly after New Delhi’s decision to walk out of the China-backed RCEP (Regional Comprehensive Economic Partnership) in 2019. That apart, other than from tariff elimination, India was able to remove the double taxation on information technology services – a long-standing issue that was eroding the sector’s competitiveness.
Nearly three years on, the department of commerce is now focused on ensuring complete saturation or utilisation of the Ecta, especially against the backdrop of the United States (US) imposing a steep 50 per cent tariff on several Indian imports from August.
In August, the department of commerce had said utilisation of the ECTA by Indian exporters stood at 84 per cent since its implementation, only two percentage points less than their Australian counterparts. In FTAs, utilisation rate is one of the key parameters to assess how the pact is faring-whether the preferential or lowered tariff rates are being used to export and import goods.
However, it is equally important to note that India remains a relatively high-tariff economy compared to Australia – a reflection of its current stage of development. On the other hand, Australia’s average tariff was already lower even before the agreement took effect, which means that India’s tariff reduction on certain products is far more substantial.
Despite that, the rate is higher than India’s past free trade agreements (FTA) with its Asian neighbours, where the utilisation rate has been way lower at 50-60 per cent, a senior government official said. So far, it is understood that unlike the trade deals with Japan, South Korea or ASEAN, a deal with Australia is considered ‘safe’ and 'win-win’ since both economies do not compete with each other.
Under the interim agreement between both countries, India is benefiting from the preferential market access provided by Australia on 100 per cent of its tariff lines – 98.3 per cent tariff lines from December 29, 2022 and the rest in a phased-manner in five years. On the other hand, Australia received preferential access to over 70 per cent of India’s tariff lines. Around 40 per cent of the tariff lines got zero-duty access immediately. This included zero duty on coal, manganese ore, copper concentrates, bauxite, sheep meat, cherries and wool, among others.
What the numbers say
Most of the labour-intensive sectors that received immediate duty concessions – from 5 per cent to zero duty – have been utilising the advantage of duty-free access while exporting goods to Australia.
Total merchandise trade between both countries stood at US $24.9 billion in FY22, but remained more or less at the same level in FY25 at $24.1 billion. During the first five months (April-August) of the current fiscal, exports contracted 11.6 per cent to $3.16 billion, while imports witnessed a sharper fall of nearly 22 per cent to $4.93 billion. However, the contraction, especially in exports, during the current fiscal could be due to frontloading of exports to the US.
Imports on the other hand, fell from $16.7 billion in FY22 to $15.5 billion in FY25. As a result, the trade deficit narrowed from $8.6 billion to $6.9 billion.
While it is too early to derive the overall success of the trade agreement, export trends over the past few years show that petroleum products continue to dominate India’s exports to Australia. The share of petroleum exports in India’s total exports to Australia stood at 54.5 per cent in FY22, compared to 52.3 per cent in FY25.
Results vary widely between sectors
Since the implementation of the deal – growth in FY25 as compared to FY22 – there has been a surge in the outbound shipments of – readymade garments (27.2 per cent), cotton yarns and madeups (24.3 per cent), electronics (128 per cent), drugs and pharmaceuticals (22.1 per cent), marine products (497 per cent), coffee (103.2 per cent), spices (29 per cent), rice (38.4 per cent), ceramics (9.2 per cent) and plastics (22.4 per cent).
On the other hand, in the case of certain labour-intensive sectors such as gems and jewellery, leather, carpets, engineering goods, the growth has been either negative or has remained flat.
In the case of engineering goods exports to Australia stood at $1.24 billion in FY25 as compared to $1.25 billion in FY22. According to Engineering Export Promotion Council of India (EEPC) Chairman Pankaj Chadha, there has been a small drop in export volumes, which is mainly demand driven. “Not to forget that we are competing with China, Vietnam and Indonesia in the Australian market, although it’s a temporary dip though,” Chadha said.
Exports of gems and jewellery stood at $338 million in FY22, but fell to $319 million during FY25. An exporter said that the demand and taste of Australian buyers is not typically gold or gold jewellery. Instead, they are interested in lab-grown diamonds.
Gems and Jewellery Export Promotion Council (GJEPC) Chairman Kirit Bhansali cited two reasons for the decline. “Firstly, Australia is a small market and there is a correction of 15-20 per cent in the price of loose diamonds as compared to last year,” Bhansali said.
The government has asked exporters to work hard and make the most of the trade deal. “In a matter of a few months, we will increase exports to Australia too,” Bhansali said.
Similarly, in the case of leather, exports declined to $63.3 million in FY25 from $74.7 million in FY22. Outbound shipments of carpets also fell to $62 million in FY25 from $67.7 million in FY22.
Ajay Sahai, director-general (DG) and chief executive officer (CEO), Federation of Indian Export Organisations (FIEO) said that a fair evaluation of any FTA should ideally be undertaken over a five-year horizon, as diversification into new markets is inherently a gradual process.
“Nevertheless, the India–Australia ECTA has already delivered encouraging results in several sectors such as apparel, marine products, medical equipment, fruits and vegetables, ceramic goods, inorganic chemicals, plastics, man-made filaments, tea, and coffee. We remain confident that, as supply chains stabilize and business linkages deepen, even stronger and more broad-based export growth will be visible across sectors in the coming years,” Sahai said.
Pradeep S Mehta, secretary general, CUTS International, said that while fluctuations in total trade volumes are to be expected, the series of broad and deep tariff cuts have enabled diversification of India's merchandise exports to Australia, as well as easier access to imported raw materials for use in domestic industries in India. “The relatively high FTA utilisation rates emerging from the preferential trade data are evidence of its appeal to firms,” Mehta said.
According to Mehta, Ecta’s implementation also served as a shot in the arm for India’s FTA strategy of securing market access and complementary trade interests with other developed country trading partners, including the UK and European Free Trade Association.
What lies ahead?
The countries are now preparing to finalise a comprehensive trade deal. This is because when Ecta was signed, it was decided that the larger idea would be to use the foundation of the interim deal to resume negotiations on the deeper and more ambitious trade deal–the comprehensive economic cooperation agreement (Ceca). Since Ecta was only an interim trade deal, several aspects of a comprehensive trade agreement, including new-age trade issues did not make it to the deal.
In July, the Australian trade minister Don Farrell had said that India and Australia are likely to expand their trade agreement in the ‘very near future’. There has been a delay in finalising a deal because the election in Australia earlier this year delayed the final negotiations. That apart, both sides were unable to find common ground on certain issues.
Agricultural products such as milk and other dairy items, chickpeas, apple, rice, bajra, walnut, among others were left out of the interim deal due to the political sensitivities related to these items. Only a few agricultural products such as oranges, mandarins, almonds, pears and cotton among others have been allowed with limited quota.
While the Australian side is pushing for further opening of the agriculture sector, India is bargaining for more collaboration in defence, aviation sectors and expediting mutual recognition agreements in certain services sectors.
[The Business Standard]
