The deal cuts tariffs on more than 85 percent of Australian exports to India, as the two countries gear up for negotiations on a full trade pact amid hopes that it would be signed by the end of the year.

India and Australia are
India and Australia are "natural partners, connected by shared values", New Delhi's commerce minister Piyush Goyal said at the signing event. (AFP)

India and Australia have signed an interim free trade deal that cuts tariffs on billions of dollars of commerce as the two Quad partners bolster their economic ties.

The Economic Cooperation and Trade Agreement was signed simultaneously in New Delhi and Canberra by India's commerce minister Piyush Goyal and his Australian counterpart Dan Tehan in a joint ceremony on Saturday.

"Our relationship rests on the pillars of trust and reliability aptly reflected in our deepening geo-strategic engagement through the Quad and the supply chain resilience initiative," Goyal said

Both countries are members of the Quad alliance with the United States and Japan, which is seen as a counterweight to an increasingly assertive China.

The agreement "delivers a clear message that democracies are working together and ensuring the security and resilience of our supply chains", Australian Prime Minister Scott Morrison said at the signing.

India's Prime Minister Narendra Modi added it would "contribute to increasing supply chain resilience and to the stability of the Indo-Pacific region".

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Strengthening ties

Negotiations on a comprehensive deal between India and Australia were launched more than a decade ago but stalled in 2015.

A full trade pact is now being negotiated and Morrison, who called Modi a "dear and trusted friend", said he hoped it would be signed by the end of the year.

Saturday's agreement cuts tariffs on more than 85 percent of Australian exports to India.

India was only Australia's seventh-largest trading partner in 2020, and accounted for just over four percent of exports last year.

Two-way trade reached around $17 billion last year, with resource-rich Australia exporting sheep meat, coal and other commodities, and India largely supplying services.

At the same time, Canberra's relations with its biggest trading partner China are at their lowest point in a generation, with many Australian goods hit with punitive sanctions and ministerial relations frozen.

Beijing has been angered at Australia's willingness to legislate against overseas influence operations, to bar Huawei from 5G contracts and to call for an independent investigation into the origins of the coronavirus pandemic.

India and China have also seen a sharp deterioration in ties after a high-altitude clash in 2020 left 20 Indian soldiers and at least four Chinese soldiers dead.

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Source: AFP