India and Australia

India and Australia are moving towards a Comprehensive Economic Cooperation Agreement (CECA), which aims to build upon the Economic Cooperation and Trade Agreement (ECTA) signed in 2022. The ECTA provided full market access to Indian exports in Australia, while India opened nearly 70% of its market, covering around 91% of bilateral trade value. Australia is now seeking greater market access under a more comprehensive framework.

The proposed CECA assumes greater significance at a time when India seeks to diversify trade, attract investment, and strengthen economic resilience amid global uncertainties, geopolitical tensions, and disruptions arising from the West Asia crisis. It forms an important part of India's broader strategy of rapidly concluding trade agreements to secure long-term economic stability.

Performance of the India–Australia ECTA

Since the implementation of the India–Australia ECTA in 2022, bilateral merchandise trade has grown substantially, rising from 12.2 billion dollars in FY 2020–21 to 24.1 billion dollars in FY 2024–25. Despite this impressive growth, the gains have remained uneven, with Australian exports accounting for nearly two-thirds of the total bilateral trade.

Similarly, services trade between the two countries has crossed 10 billion dollars, but Australia's higher education sector dominates this relationship, contributing almost 60 per cent of total services trade. This imbalance has generated discussions on the need for a more equitable and diversified economic partnership under the proposed CECA.

Contrasting Investment Trends

The investment relationship between India and Australia presents a different picture from trade flows. Indian investments in Australia have reached nearly 32 billion dollars in 2024, whereas Australia's cumulative Foreign Direct Investment (FDI) in India stands at approximately 18 billion dollars.

This divergence raises important questions regarding the future structure of economic cooperation and highlights the need for greater Australian investments in India's growth sectors, including manufacturing, infrastructure, agriculture, and technology.

Australia’s Demand for Greater Market Access

Australia's 2025 Economic Engagement Roadmap for India identifies four major sectors for enhanced cooperation: clean energy, education, tourism, and agribusiness.

While both countries have largely converged on cooperation in clean energy, education, and tourism, agriculture continues to remain the most contentious area in the negotiations. Australia's demand for wider agricultural access has emerged as the principal challenge in achieving a comprehensive trade agreement.

Agriculture: The Major Sticking Point

India has historically maintained a cautious approach towards agricultural liberalisation in its trade agreements. Sensitive sectors such as dairy, wheat, rice, sugar, and chickpeas have traditionally been protected from foreign competition.

Even within the limited agricultural access provided under ECTA, Australian agricultural exports to India increased by nearly 90 per cent, while Indian agricultural exports to Australia expanded by only 35 per cent. This imbalance has reinforced India's concerns regarding further market opening.

Two Contrasting Agricultural Systems

The differences between the agricultural systems of India and Australia explain the complexity of the negotiations.

Australia's agricultural sector is highly mechanised, export-oriented, and characterised by an average farm size exceeding 1,400 hectares. Agriculture contributes only 2.5 per cent of Australia's GDP, allowing producers to operate at significant economies of scale.

In contrast, India's agricultural landscape is centred around small and marginal farmers, with an average landholding of merely 0.73 hectares. Agriculture contributes approximately 16 per cent of India's GDP and supports the livelihoods of more than half of the country's population. Consequently, agricultural policy in India is deeply intertwined with food security, rural employment, and socio-economic stability.

Why India Is Reluctant to Liberalise Agricultural Trade

India's hesitation to provide greater agricultural access stems from several structural challenges. Indian farmers continue to face fragmented landholdings, heavy dependence on monsoon rainfall, low profitability, and vulnerability to price fluctuations and market shocks.

Opening domestic markets to cheaper agricultural imports from Australia could adversely affect millions of small farmers. Therefore, protecting sensitive agricultural sectors is not merely a trade policy decision but also a political, economic, and social imperative linked to rural livelihoods and national food security.

The Central Dilemma in CECA Negotiations

The most significant challenge in the proposed CECA negotiations lies in balancing Australia's demand for expanded agricultural access with India's developmental priorities. Agriculture remains both an economic activity and a source of livelihood for a substantial section of India's population.

Therefore, the success of CECA will depend upon finding a framework that accommodates trade liberalisation without undermining the interests of Indian farmers or threatening food security.

Agriculture as a Platform for Cooperation Rather Than Conflict

Agriculture need not remain a zero-sum issue in India–Australia relations. Instead, it can become a foundation for deeper cooperation through investments, technology transfer, and institutional partnerships.

Greater collaboration in areas such as biosecurity standards, phytosanitary regulations, digital certification systems, quarantine protocols, and regulatory harmonisation can improve market access for agricultural products from both countries.

The 2025 Organic Products Arrangement already demonstrates the potential for such cooperative approaches, facilitating smoother trade in organic products while maintaining high quality standards.

Australia’s Technological Advantage in Agriculture

Australia's strengths extend beyond agricultural exports to include advanced systems that support modern farming practices. These include precision agriculture technologies, cold-chain infrastructure, efficient water management systems, and climate adaptation strategies.

Such expertise is particularly valuable for India, which continues to lose between 15 and 35 per cent of agricultural output annually due to pests, diseases, and post-harvest inefficiencies. Australian investments and technological partnerships could help reduce these losses and improve productivity.

Expanding Australian Investments in Indian Agriculture

A more balanced economic partnership should involve greater Australian participation in India's agricultural ecosystem through investments in storage facilities, warehousing infrastructure, logistics networks, farm-level technologies, agri-tech ventures, and research collaborations.

Partnerships between universities, research institutions, and private enterprises can facilitate innovation and knowledge transfer, thereby strengthening India's agricultural competitiveness and resilience.

The recently launched India–Australia Smart Farm Network Initiative reflects the potential of such collaborations and demonstrates how technology and investment can complement traditional trade negotiations.

Towards a Balanced and Complementary Economic Partnership

Agriculture occupies a central place in India's economy and cannot be treated merely as a bargaining instrument in trade negotiations. At the same time, excluding agriculture entirely from economic cooperation would limit the potential of the bilateral relationship.

The future of India–Australia economic relations should therefore be based on a complementary partnership model, where trade liberalisation is accompanied by investments, technology transfer, institutional cooperation, and capacity building. Such an approach would ensure that both countries derive mutual benefits while addressing their respective developmental priorities.

Conclusion

The proposed India–Australia Comprehensive Economic Cooperation Agreement (CECA) represents an opportunity to transform bilateral relations into a deeper and more integrated economic partnership. While agriculture remains the most challenging aspect of the negotiations, it also offers significant scope for cooperation through technology, investment, and modernisation.