“I think it’s probably the most comprehensive agreement that India has entered into, even though it is not by any means the most comprehensive one for Australia,” said Peter Varghese, a former secretary of the Department of Foreign Affairs and Trade in Australia.

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“On the strategic side, there is a shared concern [between India and Australia] over the sum of the actions China has taken. And a shared concern about what appears to be China’s strategic ambition to be a predominant power in the Pacific,” Varghese told the Post, adding that there is “a strong underlying complementarity” between the economies of India and Australia.

Two-way trade between Australia and India was valued at roughly US$27.5 billion in 2021, less than a quarter of Australia’s US$178 billion trade with China in the same year.

The agreement with India is expected to increase bilateral trade to as much as US$50 billion in the next five years, and it marks a step towards a Comprehensive Economic Cooperation Agreement between the countries.

It also marks a step forward after India and Australia entered into a critical minerals investment partnership in 2020.

These minerals – including lithium, cobalt and rare earths – are used in hi-tech clean-energy products and are also essential for countries such as India to meet their goals in cutting greenhouse gas emissions. And since there is often no substitute for them, monopolies over their extraction and processing – by just one or a handful of countries – create greater supply risks.

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China produces 63 per cent of rare earth elements. As for cobalt, which is not considered a rare earth, about 70 per cent is supplied by the Democratic Republic of Congo, and Chinese companies own or finance the vast majority of industrial cobalt mines, according to an updated working paper released by India’s Centre for Social and Economic Progress in September.

China is also among the top three global extractors for eight of the 10 minerals identified as most essential for India to meet its renewable energy targets.

“Australia is in a very fortunate position to build up its critical mineral exports,” said Varghese, referring to the country’s agreement with India.

“To the extent that there is currently a near monopoly in the sector that relates to China, I think our ability to do that with India as well as many other places will become more and more significant.”

In March, Australia allocated A$5.8 million (US$3.88 million) to the investment partnership, aiming to support Indian investment in the country’s critical minerals projects. Both countries have envisioned joint investment in lithium and cobalt projects in Australia.

Their trade agreement will eliminate tariffs and reduce customs duties on key critical minerals exports to India such as titanium, cobalt and lithium, according to a report on the agreement by the Australian government.

“Recently, Australian lithium exporters have benefited from a rapid rise in lithium prices, fuelled by demand for EV batteries,” said Madeline Dunk, an economist with the Australia and New Zealand Banking Group, adding that Australia’s exports of these goods to India will “increase significantly”.

Meanwhile, India is being seen as an emerging destination for Australian wine, after exports to its biggest market, China, plummeted by almost A$1 billion in 2021, year on year.

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“India has a rising middle class, and with increasing urbanisation, there is an inclination towards imported wine,” said Rachel Triggs, head of ESG and market access at Wine Australia.

Wine consumption in India is expected to grow from 29.2 million litres in 2020 to 55.5 million litres by 2025, according to Euromonitor’s export market development guidebook for India.

In 2021, India imported 5.6 million litres of wine, up 84 per cent from the previous year, with “Australia being the main contributor of this growth”, Triggs said.

However, the trade agreement would give preferential treatment to only premium wines or wines sold in retail shops for about A$50-A$60. This would benefit only about 2 per cent of the wines exported by Australia to India, according to Triggs.

India’s market may also be harder to crack than that of China, where wine consumption tends to be higher in higher-tier cities.

In India, on the other hand, each state has varying regulations on the distribution and consumption of alcohol, Triggs noted.

Varghese said that while India is not currently among Australia’s top export destinations for wine, that could change.

“Just as Australia has built – over a period of time – very substantial markets in China, the US and Europe, I think over time we will see India become a more significant part of the overall wine exports,” he added.