Australia, India Push for Treaty and Trade Pact to Boost Economic Ties

SYDNEY, 30 SEPTEMBER 2026 —

Australia and India Reopen High-Stakes Talks on Investment Treaty and Trade Deal as Economic Ties Face Uncertainty

With Indian Commerce and Industry Minister Piyush Goyal confirming on 25 September that talks were underway, the discussions mark a pivotal moment for two economies increasingly reliant on each other for critical minerals, manufacturing, and technology—yet still grappling with the legal and regulatory hurdles that have stymied past cooperation.

The stakes are clear: without a BIT, Australian investors risk operating in India without the enforceable safeguards they once had, while without a CECA, even the most promising joint ventures—like the A$15 million partnership between Wollongong’s Sicona and Indian firm Himadri announced in May 2025—could struggle to turn profits into sustainable production.

The challenge lies in balancing investor protections with India’s push for domestic manufacturing and Australia’s incentives for local processing, all while navigating a legal landscape reshaped by India’s 2015 overhaul of its investment treaty framework.

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The urgency of the BIT stems from a legal void created by India’s termination of its 1999 Agreement on the Promotion and Protection of Investments (APPI), which took effect on 23 March 2017.

That agreement, in force since May 2000, had guaranteed fair treatment for investors, compensation for expropriation, and arbitration rights—provisions that allowed Australian firms like White Industries to successfully challenge India in 2011 after Indian courts took nine years to enforce a commercial arbitration award. The case hinged on a clause ensuring treatment no less favorable than that given to third-country investors, letting the tribunal reference stronger protections from India’s treaty with Kuwait.

India’s Law Commission later cited this and other investor-state disputes as justification for its 2015 model BIT, which restricted arbitration, mandated domestic remedies for five years, and excluded sectors like taxation, subsidies, and procurement from investor protections.

The old treaty’s termination left a 15-year survival clause—meaning investments made before 23 March 2017 retain protections until March 2032, but no new investments can rely on it. For a battery factory or a critical minerals refinery announced today, that means no automatic right to international arbitration if disputes arise.

Australia’s opposition to investor-state dispute settlement (ISDS) in new trade agreements further complicates negotiations, forcing both sides to design a framework that clarifies investor rights while preserving regulatory flexibility. The new BIT must define what constitutes fair treatment, when arbitration is permissible, and how domestic laws override treaty protections—all without scaring off capital.

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Yet even a robust BIT cannot guarantee market access. That’s where the CECA comes in—and where the real test of cooperation begins. The Sicona-Himadri deal illustrates the potential: A$15 million in Indian capital backing an Australian battery technology, with royalties flowing back to Wollongong while production happens in India. But such partnerships face tariff barriers, local-content rules, and regulatory hurdles that can derail them.

Under the existing Economic Cooperation and Trade Agreement (ECTA), Australian inputs can count toward bilateral origin rules, but not toward India’s domestic value-addition requirements—such as the 60% local content mandate for India’s advanced chemistry cell incentive. Worse, royalties paid to foreign partners are excluded from local-content calculations under Indian procurement laws, meaning a product eligible for lower tariffs under ECTA may still fail to qualify for subsidies or government contracts.

Regulatory approvals add another layer of complexity. ECTA allows recognition of testing and certification from the other country "whenever possible", but security and environmental reviews remain subject to domestic discretion. A battery manufacturer or minerals processor must navigate separate approval processes in both countries, with no guarantee of alignment.

The CECA must address these gaps by: - Clarifying which production steps and imported inputs qualify goods for tariff preferences; - Specifying how jointly produced goods are treated in procurement, including whether foreign royalties count toward local-content thresholds; - Harmonizing certification standards, including laboratory recognition, test result acceptance, and approval timelines; and - Streamlining project approvals for critical minerals and battery projects, ensuring security and environmental safeguards do not become non-tariff barriers.

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The negotiations also come as both governments prioritize domestic industrialization. Australia’s critical minerals tax incentive, set to begin in July 2027, will favor eligible domestic processing, while India’s advanced chemistry cell incentive demands 60% local value addition within five years. These policies reflect competing visions: Australia wants to process its minerals at home, while India seeks to assemble and manufacture globally—even if that means sourcing inputs from abroad.

The CECA must reconcile these goals without creating protectionist deadlocks, particularly in sectors where supply chains are already stretched by geopolitical tensions.

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The July 2025 sideline talks between Indian External Affairs Minister Dr. S. Jaishankar and Australian Foreign Minister Penny Wong during ASEAN meetings signaled a willingness to engage, but the path forward remains fraught.

Dr. Simran Keshwani, founder of IndiaForth, a Sydney-based strategic advisory firm, frames the dilemma starkly: "The BIT must give firms confidence to commit capital; the CECA must help turn that capital into production that creates lasting gains in both countries." Without both agreements, Australian investors risk operating in a legal gray zone, while Indian manufacturers may struggle to access the technology and financing they need to compete globally.

The Sicona-Himadri partnership offers a blueprint for success—but only if the BIT and CECA remove the legal and regulatory friction that has plagued past collaborations. With critical minerals demand surging and battery supply chains reshaping, the two countries can no longer afford to leave these negotiations half-finished.

The next steps will be watched closely: whether India’s revised BIT model can accommodate Australia’s demands for enforceable protections, and whether the CECA can deliver the market access and certification certainty that turns capital commitments into viable businesses. The clock is ticking—not just for the talks, but for the next generation of Indo-Australian industrial partnerships.