India- Australia Discusses Cooperation in Trade, Defence and Security

India-Australia Talks: Trade Hits $24 Billion, Defence Remains High on Agenda

$24.1 billion — that's the headline number for India–Australia bilateral trade in FY25. But when Prime Minister Narendra Modi and his Australian counterpart met on the sidelines of the G20 Summit in Johannesburg this November, the conversation extended far beyond commerce. Defence, nuclear energy, and critical minerals emerged as key themes, underscoring the strategic depth of the partnership. The timing? Australia's recently launched Economic Engagement Roadmap with India, outlining 50 targeted opportunities across sectors. But beneath the ambitious rhetoric lies the tension between promise and execution.

What Drives the Partnership?

India and Australia have transitioned their relationship from a Strategic Partnership in 2009 to a Comprehensive Strategic Partnership in 2020, reflecting the increasing convergence of geopolitical interests in the Indo-Pacific. The institutional framework supporting this partnership spans multiple mechanisms: a '2+2 Dialogue' involving Defence and Foreign Ministers, a Mutual Logistic Support Arrangement, and a Defence Science & Technology Implementing Arrangement — both signed in 2020.

The defence collaboration is bolstered by exercises like AUSINDEX, MALABAR, and Exercise Pitch Black, with Australia actively participating alongside India, the U.S., and Japan under the Quadrilateral Security Dialogue (QUAD). On the trade front, the Economic Cooperation and Trade Agreement (ECTA), implemented in 2022, has already eliminated tariffs on about $30 billion of Australian exports to India. Negotiations for a broader Comprehensive Economic Cooperation Agreement (CECA) are currently underway to expand the trade canvas further.

Education and critical minerals are also strong pillars of cooperation. Australian universities continue to attract Indian students en masse, contributing significantly to people-to-people ties. The Australia-India Critical Minerals Investment Partnership, established in 2022, aims to secure vital inputs — lithium, cobalt, and rare earths — for India's energy transition, supported by $5 million in joint research funding.

The Case for Strengthened Cooperation

The strategic value of Australia in India's Indo-Pacific calculus cannot be overstated. As the regional balance grows increasingly precarious amid aggressive Chinese posturing, Australia offers India a reliable partner committed to a rules-based maritime order. Collaborative platforms such as QUAD and the Indian Ocean Rim Association further cement this alignment.

Trade prospects are equally promising. India ranks as Australia’s eighth-largest trading partner — an achievement that was accelerated by the ECTA. By eliminating tariffs on Australian coal exports, India now benefits from more accessible energy inputs, supporting industrial and economic growth. A finalized CECA would diversify trade into sectors such as digital commerce and clean energy. For example, the India-Australia Rooftop Solar Training Academy, launched in 2025, aims to train 2,000 solar technicians, including women and youth, in renewable energy solutions.

Then there’s the critical minerals initiative. India's push for electric vehicles and renewable technologies is heavily dependent on lithium and rare earths, where Australia holds significant reserves. The success of the Australia-India Critical Minerals Research Hub could establish a reliable supply chain while driving innovation in sustainable mining practices.

The Skeptics Have Questions

Yet, the partnership is not without complications. Start with trade. While bilateral trade surged to $24.1 billion, India’s exports accounted for only $8.58 billion, compared to imports worth $15.52 billion. Tariff-free access disproportionately benefits Australia, echoing concerns about a lopsided trade engagement. Negotiations for the CECA have dragged on, with slow diversification beyond traditional goods like coal and LNG.

Defence collaboration, despite extensive joint exercises, faces structural limitations. Although Australia participated in the MALABAR exercise and signed military logistics agreements, the partnership remains limited in defence technology transfer and joint production. Bureaucratic hurdles within India's defence procurement systems exacerbate this gap.

Educational ties also merit scrutiny. Australia continues to be a major destination for Indian students, but the occasional attacks on members of the Indian diaspora raise long-term concerns about societal integration and safety. Mutual recognition of academic qualifications and work visas is another friction point, complicating the mobility of skilled professionals.

The International Lens: Lessons from Japan

Australia faces dilemmas similar to Japan when navigating partnerships with India. Japan's Comprehensive Economic Partnership Agreement (CEPA) with India, signed in 2011, also sought to overcome trade imbalances and foster technology transfer. Despite robust collaboration in infrastructure (think bullet trains) and clean energy, Japan struggled to deepen agricultural trade due to India's protective SPS regulations — a problem reflected in Australia's dealings with India's agricultural sector. However, Japan's success in scaling joint manufacturing ventures offers Australia a roadmap for advancing defence co-production with India.

Where Are We Headed?

The irony here is that while both nations frame their partnership as "comprehensive," key sectors — especially defence and education — lack the level of institutional depth seen in economic cooperation. The real bottleneck lies in aligning domestic policy incentives with bilateral commitments. For instance, the slow progress in CECA negotiations reveals India's reluctance to fully liberalize certain sectors. Similarly, defence collaboration is unlikely to advance unless India's private sector is empowered through structural reforms in defence procurement.

It is too early to tell whether the recently launched Economic Engagement Roadmap will address these gaps meaningfully. What is clear, however, is that India and Australia cannot afford to lose momentum in this partnership, given the volatile strategic environment in the Indo-Pacific.

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