India-Australia: Bilateral Trade and Investment Profile

Over the years, the India-Australia bilateral relationship has deepened significantly. In 2009, India and Australia upgraded their partnership to a ‘Strategic Partnership,’ which was further enhanced to a Comprehensive Strategic Partnership (CSP) in 2020. This evolution marked a new era of collaboration across multiple sectors, supported by a robust institutional framework that includes high-level visits, annual prime ministerial meetings, the 2+2 Defence and Foreign Ministers’ Dialogue, and various Joint Working Groups (JWGs) focusing on energy and defense.

In recent years, the relationship has experienced remarkable growth, expanding into both traditional and emerging areas. This has opened new avenues for engagement, positioning the India-Australia partnership as a key pillar of regional stability and global cooperation.

Economic cooperation

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The Australia-India Economic Cooperation and Trade Agreement (ECTA), effective from December 29, 2022, offers substantial trade benefits to both countries. Over 85 percent of Australian goods exports to India are now tariff-free, with this figure expected to reach 90 percent by January 2026. Meanwhile, 96 percent of Indian imports to Australia are tariff-free, rising to 100 percent by 2026. This agreement allows Australian businesses to access India’s rapidly growing market of 1.4 billion people, facilitating trade diversification. Negotiations for a Comprehensive Economic Cooperation Agreement (CECA) have resumed to build on ECTA and further strengthen economic ties.

People-to-people connect and professional mobility

Starting October 1, 2024, Australia will begin offering up to 1,000 work and holiday visas each year to Indian citizens under its ECTA commitments. Under the ECTA, Indian nationals between the age of 18-30 can apply for a one-year visa to work, study, and travel across Australia.

Education

In 2023, Australia and India signed a mutual recognition agreement for qualifications. And in 2024, Australia’s Deakin University became the first such overseas institution to open a foreign branch in India, setting up campus in GIFT City, Gujarat. The Deakin University campus has been designed to provide students with an educational and digital learning environment similar to that in Melbourne. The first batch of Masters’ students are set to graduate in 2025 from the GIFT City Deaking branch.

On other side, per the Indian High Commission in Canberra, India continues to be the second-largest source country for international student enrolments in Australia, with 122,391 Indian students studying in Australia in January-September 2023 period. Per overseas education services provider Shiksha, Australia recorded a footfall of 500,000 international students in 2024, out of which 122,202 were Indian students. Australia is predicted to experience a 2 percent rise in its international student population over the next two years.

Critical minerals

Australia possesses abundant critical minerals essential for low-emission technologies, and these resources play a significant role in international diplomatic negotiations. The extraction of these minerals and the development of domestic processing capabilities are crucial for establishing secure supply chains. India, which heavily relies on imports for its manufacturing industry, ranks second globally in steel production and aims to decarbonize, making it a natural partner for Australia.

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Consequently, Australia and India have a significant opportunity to strengthen their partnership in the critical minerals sector, essential for the global green transition. India’s Critical Minerals Mission aims to enhance domestic production and recycling, aligning with its growth goals in electronics and renewable energy. The 2023 Australia-India Critical Minerals Investment Partnership has identified five key projects—two for lithium and three for cobalt—for joint investment, reinforcing collaboration. Both countries are involved in multilateral initiatives to secure critical mineral supply chains and reduce reliance on concentrated production, especially from China.

Dialogue and ministerial

The bilateral economic relationship has intensified, with Australia launching the India Economic Strategy to 2035 to leverage India’s economic growth. An updated version was released in April 2022, while India’s Commerce and Industry Minister, Piyush Goyal, unveiled the CII Australia Economic Strategy Report in December 2020, focusing on opportunities for Indian products and investments in 12 key and 8 emerging sectors in Australia.

The India-Australia Joint Ministerial Commission (JMC), established in 1989, facilitates dialogue on trade and investment. The 17th JMC was co-chaired by Shri Goyal and former Trade Minister Dan Tehan in New Delhi in 2021, while the 18th JMC took place on March 11, 2023, co-chaired by Shri Goyal and Australia’s current Trade Minister Don Farrell.

Bilateral trade

According to a 2023 report by India’s Ministry of External Affairs, India ranks as Australia’s sixth-largest trading partner, with bilateral trade experiencing significant growth in recent years. In 2022, trade surged by 41 percent, increasing from US$22.2 billion in 2021 to US$31.4 billion. India’s exports to Australia rose by 38 percent to US$8.7 billion, while Australia’s exports to India grew by 42 percent to US$22.5 billion.

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Key Indian exports to Australia include refined petroleum, medicaments (including veterinary products), pearls and gems, jewelry, and made-up textile articles. Conversely, India imports coal, copper ores and concentrates, natural gas, non-ferrous and ferrous waste and scrap, as well as education-related services from Australia. This robust trade relationship underscores the strengthening economic ties between the two nations.

In June 2024, India exported US$873 million and imported US$1.13 billion from Australia, resulting in a trade deficit of US$253 million. Compared to June 2023, exports to Australia decreased by 18.6 percent, while imports fell by 21.1 percent. This decline was attributed to significant drops in exports of petroleum products (-72.4 percent), agrochemicals (-51.9 percent), and motor vehicles (-61.8 percent). On the import side, India saw a 35 percent decrease in coal imports, a 73.8 percent drop in processed minerals, and a complete halt in crude mineral imports.

Top traded items

Source: Trading Economics

Source: Trading Economics

Investment flow

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Australian investments in India total approximately US$15 billion, while Indian investments in Australia amount to around US$12 billion. Australia ranks 26th in foreign direct investment (FDI) in India, with cumulative FDI reaching US$1.38 billion from April 2000 to September 2023. The AIM–NITI Aayog accelerator supports circular economy startups in both countries, and various agreements enhance academic and research collaborations. Recent high-level defense meetings and joint naval exercises underscore the growing strategic partnership. Additionally, a successful roundtable on health workforce training was held in New Delhi in collaboration with Australia.

By the end of 2022, Australia’s investment stock in India stood at US$17.6 billion, while India’s investment in Australia totaled US$34.5 billion. India’s economic growth presents significant opportunities for Australian goods and services, particularly in sectors such as agriculture, minerals, resources, education, and skills training, while also creating new two-way investment pathways, especially in renewable energy.

Australian companies in India
Several major Australian companies are actively engaged in the Indian market across diverse sectors, including:

1. Macquarie Group: Provides advisory and capital-raising services for corporate and government clients, specializing in mergers and acquisitions.
2. ANZ Bank: Operates in India, offering personal banking and debt investments through bonds and notes.
3. BHP Billiton: A global mining leader that supplies iron ore, copper, oil, gas, and metallurgical products, with offices in Gurugram.
4. Wesfarmers: Australia’s largest conglomerate, dominating the retail space, including the Bunnings hardware chain.
5. Telstra Ventures: The venture capital arm of Telstra, investing in technology companies to foster synergistic revenues.

Indian companies in Australia
Prominent Indian companies making significant contributions in various sectors include:

1. Bank of Baroda: Established in 1908, offers a range of banking services, including commercial and personal banking.
2. Sterling and Wilson Solar Ltd: Specializes in providing complete turnkey solutions for engineering, procurement, and construction in the solar energy sector.
3. Tata Consultancy Services (TCS): Based in Mumbai, TCS is a leading global IT services provider with approximately 450,000 employees.
4. Infosys: Headquartered in Bangalore, Infosys employs around 250,000 individuals across 46 countries, delivering traditional IT services and solutions.

India-Australia Double Taxation Avoidance Agreement (DTAA)

The India-Australia Double Taxation Avoidance Agreement (DTAA), effective since December 30, 1991, has been revised multiple times to eliminate double taxation on income earned by individuals or entities in both countries. The agreement clarifies tax treatment for residents and non-residents, covering taxes on income and wealth, while encouraging transparency in tax matters. The DTAA ensures that foreign investors are not taxed twice on income, offers tax relief, and helps prevent tax evasion.

Key provisions of the DTAA include:

1. Residence-based taxation: Ensures that residents are not taxed twice on the same income.
2. Business profits: Establishes fair taxation of profits earned by companies in both countries.
3. Dividends, interest, and royalties: Sets reasonable tax rates for these payments to avoid double taxation.
4. Capital gains: Provides fair taxation on the sale of assets such as shares and real estate.
5. Exchange of information: Facilitates information sharing between tax authorities to prevent evasion.
6. Permanent establishment (PE): Defines a fixed place of business that qualifies as a PE, impacting tax liabilities.

Withholding tax rates under the DTAA are favorable, including 15 percent for dividends and interest, and 10 percent-15 percent for royalties. The agreement also outlines taxation rules for capital gains, fees for technical services, and both independent and dependent personal services. It provides relief through tax credits for taxes paid in one country against those in the other.

The DTAA has been beneficial for both countries by promoting foreign investment, ensuring fair taxation, and preventing double taxation. A notable ruling by the High Court of Delhi in the CUB Pty Ltd. v. Union of India case clarified that income from the transfer of intangible assets may not be taxed in India if ownership is established elsewhere, highlighting the importance of situs in determining tax liability.

Outlook

The India-Australia bilateral relationship is evolving into a comprehensive economic and strategic alliance that holds immense potential for both nations. The implementation of trade agreements, combined with investment cooperation and commercial collaboration in emerging sectors, will be key drivers of economic growth and regional stability. As both countries navigate global economic challenges and geopolitical tensions in the Indo-Pacific, their commitment to strengthening ties will be instrumental in fostering a dynamic partnership that benefits both economies, addresses maritime and strategic security, and promotes cultural and people-to-people exchanges. However, at this stage, there is scope for significant growth, with opportunities for innovation, collaboration, and R&D.

(With inputs from Melissa Cyrill.)

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