India's export to Australia recording healthy growth; trade pact completes 3 years

India's burgeoning trade relationship with Australia, marked by the recent Economic Cooperation and Trade Agreement (ECTA) and the impending full duty-free access for all Indian products, represents a pivotal moment in India's foreign trade strategy and geopolitical alignment. This development is not merely about economic statistics; it reflects a conscious effort to diversify trade partners, strengthen supply chains, and bolster strategic partnerships in the Indo-Pacific region.

**Background Context and Evolution of Relations:**

Historically, India and Australia, despite being Commonwealth nations, had somewhat limited bilateral trade, often overshadowed by their individual ties with other major economies. However, the early 21st century saw a growing recognition of shared democratic values, strategic interests, and economic complementarities. This led to an elevation of their relationship, culminating in the declaration of a Comprehensive Strategic Partnership (CSP) in June 2020. The CSP laid the groundwork for enhanced cooperation across various sectors, including defence, education, science and technology, and crucially, trade and investment. The push for a Free Trade Agreement (FTA) gained momentum against the backdrop of global supply chain disruptions, the need for market diversification, and India's decision not to join the Regional Comprehensive Economic Partnership (RCEP).

**The Trade Pact: ECTA and the Road to Full Duty-Free Access:**

What transpired was the signing of the India-Australia Economic Cooperation and Trade Agreement (ECTA) on April 2, 2022, which subsequently came into force on December 29, 2022. This interim pact was a significant step, as it immediately eliminated tariffs on 96% of Indian goods entering Australia (by value) and 85% of Australian goods entering India. The recent announcement, highlighting an 8% rise in Indian exports to Australia in 2024-25, is a direct testament to the ECTA's initial success. The most significant future development is the commitment for all Indian product categories to become duty-free in Australia starting January 1, 2026. This indicates a progression towards a more comprehensive agreement, likely a full Comprehensive Economic Cooperation Agreement (CECA), which would encompass services, investment, and other areas beyond goods.

**Key Stakeholders Involved:**

The primary stakeholders are the **Governments of India and Australia**, represented by their respective Ministries of Commerce and Industry, and Foreign Affairs. Their political will and negotiating teams were instrumental in crafting this agreement. **Indian and Australian businesses and exporters** are direct beneficiaries, gaining enhanced market access and reduced costs. Specifically, India's **labour-intensive sectors** such as textiles, apparel, leather, gems and jewellery, engineering goods, and agriculture products stand to gain significantly from increased export opportunities. The **Indian workforce** also benefits from potential job creation spurred by increased production for exports. Furthermore, consumers in both countries gain access to a wider variety of goods at potentially lower prices.

**Significance for India:**

This trade pact holds immense significance for India across multiple dimensions. **Economically**, it provides preferential access to a developed market, boosting India's exports, contributing to GDP growth, and earning foreign exchange. The focus on labour-intensive sectors aligns with India's 'Make in India' initiative and its demographic dividend, promising job creation at scale. **Strategically**, it strengthens India's economic ties with a crucial partner in the Indo-Pacific, diversifying its trade basket away from over-reliance on specific regions and enhancing supply chain resilience. This aligns with India's 'Act East Policy' and its engagement in multilateral forums like the Quad, where economic cooperation with like-minded partners is a key pillar. The agreement also enhances India's credibility as a reliable trading partner and a responsible global player, capable of negotiating and implementing complex trade deals.

**Constitutional and Policy References:**

The power to enter into and implement such international trade agreements stems from the **Seventh Schedule of the Indian Constitution**, specifically the **Union List**. Entry 10 (Foreign Affairs), Entry 14 (Entering into treaties and agreements), and Entry 41 (Trade and Commerce with foreign countries) explicitly grant the Union government the authority in these matters. Furthermore, **Article 253** empowers the Parliament to make any law for implementing any treaty, agreement, or convention with any other country, providing the legal framework for domestic implementation of international trade obligations. Such agreements are integral to India's overall **Foreign Trade Policy (FTP)**, which aims to boost exports, promote 'ease of doing business,' and integrate India into global value chains.

**Future Implications:**

The full duty-free access by 2026 is expected to cement the economic partnership, paving the way for a full CECA that could cover services, investment, rules of origin, sanitary and phytosanitary measures, and digital trade. This could lead to further integration of value chains between the two economies and potentially attract more foreign direct investment (FDI) into India from Australia. Geopolitically, a stronger economic bond reinforces the strategic partnership, contributing to stability and prosperity in the Indo-Pacific region, especially in the context of evolving regional power dynamics and the need for a rules-based international order. This successful model could also inspire similar comprehensive agreements with other key partners, furthering India's ambition of becoming a global manufacturing and export hub.