U.S. Nonfarm Payrolls Report for March Records an Overall Positive Performance While Fed Shows Worries

Summary:

The U.S. Department of Labor reported Friday that the labor market recovery continued in March. Overall employment increased by 431,000 in March. The unemployment rate declined by 0.2 percentage points to 3.6%, still 0.1 percentage points higher than the pre-pandemic level. Although the increase in employment was slightly below market expectations, employment valuations for both January and February were corrected upward. The U.S. monthly average growth for Q1 2022 was 562,000 jobs, with a limited overall impact on gold prices.

U.S. Nonfarm Payrolls Report for March Records an Overall Positive Performance While Fed Shows Worries_1

Quick Review- U.S. March Nonfarm Payrolls Data

The U.S. created 431,000 new jobs in March and the unemployment rate fell more than expected to 3.6%, near its pre-pandemic low, underscoring the continuation of a robust labor market. Meanwhile, payroll growth accelerated, which could provide support for the Fed's aggressive tightening in the coming months.

The data show that the recovery in the labor market continues to accelerate at a strong pace as employers have made better achievements in filling the employment gap. Inflation, a decrease in household savings glut, and steady wage growth will be factors attracting more Americans to work in the coming months. With the states widely removing restrictions, the COVID-19 pandemic is no longer a major impediment to job market development.

U.S. Nonfarm Payrolls Report for March Records an Overall Positive Performance While Fed Shows Worries_2

U.S. Nonfarm Payrolls Report for March Records an Overall Positive Performance While Fed Shows Worries_3

Sub-indicators

Despite the low unemployment rate, employment levels in the U.S. remain significantly below the levels forecasted prior to the pandemic. This gap reflects a slow recovery in the labor force participation rate (up only 0.1 percentage points in March). The limited recovery appears to be driven not by the so-called "Great Resignation" but by the gradual return of workers who were laid off in the early stages of the pandemic.

On the other hand, the number of long-term unemployed people (unemployed for more than 27 weeks) decreased by 274,000 to 1.4 million. This is still 307,000 higher than that in February 2020, but the gap is shrinking rapidly. In the last six months alone, it has dropped by nearly 1 million.

The underemployment remains in stark contrast to the performance of actual economic growth compared to pre-pandemic expectations, with current economic growth almost back to the levels forecast earlier. This contrast partly reflects higher productivity growth during the pandemic. It is difficult to say whether this growth will be sustained as the reasons for the higher productivity growth remain less clear, but the business gains to date are good news for the U.S. economy. Historical data suggest that higher productivity growth will result in higher average payrolls.

In the short term, higher productivity may make labor costs lower than in other cases. This is a pleasing development given the upward pressure on wages from the shortage of workers. After a significant slowdown in February's growth, average hourly wages rose by 0.4% in March and at an average annual rate of 5.6%, slightly higher than expected, the biggest increase in a series of data since 2007. There was a bigger increase in May 2020, but it was skewed by the impact of the pandemic, during which the low-paying jobs have been eliminated.

That is to say, the momentum of this growth remains strong, although not as unexpectedly dramatic as in previous months. And this 12-month change continues to be more than 2 percentage points higher than the average for the decade prior to the pandemic. While payroll growth appears to be slowing in some sectors, such as leisure and hospitality, it has picked up in others.

In addition, the labor force participation rate recorded a steady increase to 62.4%, which was one percentage point lower than the January 2020 level. This is the third consecutive month that the number of labor participants has increased. From this figure, we can see that Americans are responding to the evaporation of savings (eaten up by inflation) and perhaps a surge in wages, and re-entering the job market.

As a result, the total employment now is only 1.6 million less than the pre-pandemic peak, another outperformance when corrections are factored in. At the current rate of job growth, it is expected to hit a record high in the coming months.

Market Watch

Overall, the March labor market report was positive in many respects, but concerns that the Fed is about to tighten monetary policy sharply to curb price increases were not relieved. The report appears to be enough to expand concerns that inflation will remain high, accompanied by the risk of a significant setback or reversal of some of the broader economic recovery. It could also mean further flattening of the yield curve ahead of the CPI report later this month.

The market has currently priced the U.S. 2-year and 10-year Treasury bond yield curves to be upside down by 17 basis points (bps) by this time next year. We don't think that won't happen until the market prices it in.

In 2019, the 2-year and 10-year Treasury bond yield curves were inverted by 5.5 bps, but the inversion quickly reversed as the Fed began to cut rates. We don't think this time it will be so short-lived, and more likely, the yield curve will likely be inverted for most of the year.

Only a disastrous March jobs report coupled with more negative data could shake the Fed's resolve to raise rates by 50 bps in May. That's why, despite the March jobs data falling slightly short of expectations, we didn't see anything that would be enough to change the Fed's decision for continuing to raise rates as planned, such as raising rates by 50 bps next month.

General Comments

The nonfarm payrolls report shows that the U.S. labor market remains robust, while payroll pressure remains unabated with a spiral of inflationary expectations (payrolls) gradually taking shape. Combined with the U.S. PCE price index rising 6.4% YoY in February (the highest level since 1982) released on March 31, all signs indicate that inflation is developing in a more aggressive direction, meaning that the Fed's monetary policy is under unprecedented tightening pressure. The current market expectation of a 50-bps rate hike in May reached 77%, and the expectation of a further 50-bps rate hike in June exceeded 60%.

The impact of interest rate hikes on gold may not depend on the upward trend in nominal interest rates affecting the upward trend in real interest rates, but on whether the Fed's move will succeed in curbing inflation in the context of a soft economic landing. Only if the two conditions of a soft economic landing and a significant fall in inflation are met at the same time could the gold price go significantly lower.

Source:CNBC

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Kevin Du

The UAE government's constant efforts to promote digital finance and encourage crypto trading, including the recent Dubai Virtual Assets Regulation Law, has raised interest in digital assets, with two in three UAE residents interested in investing into cryptocurrencies within the next five years, according to the latest YouGov report.

Of these, young respondents between 25 to 34 years of age – which comprise 74 percent of the UAE respondents – are most likely to invest in cryptocurrencies, as compared to older adults, data from YouGov's "The Future of Financial Services Report" report.

Two in Three UAE Residents Are Interested in Crypto as Dubai's Virtual Assets Law Deepens Trust in Trading_1

The report uses deep-dive custom research and data from YouGov's profiles to explore the current global financial landscape, and identify the global adoption of, and trust in, new and emerging financial services across 18 international markets.

Data from the whitepaper suggests that interest to invest in cryptocurrency is high both in the long term as well as the short term.

Nearly one in five consumers in the UAE (21 percent) said that they intend to trade in cryptocurrencies in the next 12 months, the third-highest proportion across the surveyed markets, after Indonesia (25 percent) and India (22 percent).

Trust in crypto on the rise

The UAE tops global markets in terms of trust in cryptocurrencies, with approximately 40 percent of consumers stating that they trust this digital asset.

Two in Three UAE Residents Are Interested in Crypto as Dubai's Virtual Assets Law Deepens Trust in Trading_2

The UAE government's recent enactment of the country's first law governing virtual assets may have played a role in installing deeper trust among people in this asset class, the report stated.

Compared to the UAE, numbers are much smaller in western markets such as the UK (6 percent), France (9 percent), and Italy (11 percent), where laws governing virtual assets are not defined.

Although trust in cryptocurrency is high, there are concerns about digital finances, some more prevalent among respondents who intend to trade in cryptocurrencies.

While risk from hackers is the biggest concern about dealing in digital financial services, it is more concerning to those who intend to invest in crypto in the next 12 months.

Additionally, concerns persist around not being able to access money without an internet connection, identity theft, and fraud protection. Government regulation and lack of knowledge are some other barriers surrounding digital finances.

Two in Three UAE Residents Are Interested in Crypto as Dubai's Virtual Assets Law Deepens Trust in Trading_3

These concerns highlight the need for cryptocurrency providers to address these challenges in order to strengthen trust and expand the market.

The global sector head of Financial Services at YouGov, Emma McInnes, said: "The financial services industry has been undergoing rapid transformation driven by both changing consumer expectations and wider industry fragmentation. In the digital age of finance, the concept of money is continuously evolving.

"This has led to the creation of new financial assets like cryptocurrencies, which were once considered niche and short-lived, but now are becoming more mainstream. Although the popularity of digital currencies is growing worldwide, there are serious concerns about security and fraud."

McInnes added: "Building trust among consumers is pivotal for this emerging asset class to accelerate adoption. Countries like the UAE have already created governing bodies to measure and promote the growth of virtual assets, and by doing so, it's keeping itself ahead of most of the world in terms of developing the crypto market."

Source: Arabian Business

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Devin

Bahrain's GDP grew by 4.29% at real prices and 18.44% at current prices in the Q4 of 2021, according to national accounts estimates issued by the Information & eGovernment Authority (iGA).

The report, which shows the growth of both the oil and non-oil sectors, revealed that the oil sector grew by 4.67% at constant prices and 64.15% at current prices, reflecting the rise in fuel prices.

The non-oil sector recorded a growth of 4.21% at constant prices and 12.99% at current prices from Q4 of last year, stated the iGA report.

Economic sectors for Q4 2021, compared to the corresponding quarter of 2020, showed evident recovery from the pandemic in hotel and restaurant activity, which recorded an increase of 31.66% in constant prices and 39.82% at current prices.

According to iGA, the results also showed a rise in transportation and communications which grew 11.54% at constant prices and 5.53% at current prices. Agriculture and fishing activity posted growth, rising 10.24% at constant prices but fell 0.06% on current prices. Electricity and water grew by 9.59% in constant prices and 8.28% at current prices, it added.

Government and private health services witnessed a 7.88% and 6.93% growth at constant and current prices, respectively, while other social and personal services rose 7.11% at constant prices and 13.81% at current prices.

Financial projects increased by 5.15% at constant prices and 2.63% at current prices. Mining and quarrying activity grew to 4.78% and 58.38% at constant and current prices, respectively.

Real estate and business services achieved 4.78% at constant prices and 2.49% at current prices. Manufacturing grew by 1.79% at constant prices and 47.18% at current prices.

Comparing the economic performance for Q4 2021 to the previous quarter, iGA report said that it had seen an economic growth of 1.49% at constant prices and 9.62% at current prices.

The oil sector fell by 4.49% at constant prices while it grew by 2.11% at current prices, while the non-oil sector achieved an increase of 2.86% and 11.03% at constant and current prices, respectively.

The report also revealed a rise in educational services, hotels, and restaurants. Government and private educational services recorded a growth of 28.76% at constant prices and 31.71% at current prices.

Hotels and restaurants increased by 20.58% and 28.80% at constant and current prices because of the continued recovery of the tourism sector in the Kingdom, stated the report.

According to iGA, transportation and communications sector witnessed a 2.58% and 1.75% growth at constant and current prices, respectively, followed by real estate activity and business services by 1.84% in real prices and 1.30% at current prices.

Other social and personal services were 1.73% at constant and 2.13% at current prices, followed by construction at 1.59% and 0.82% at constant and current prices, respectively, it stated.

The report showed recovery in other government services, financial projects, trade activity, manufacturing, government, and private health services in varying proportions when comparing the fourth quarter with the one from the previous year, it added.

Source: TradeArabia

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Samantha Luan

Russia-Ukraine Conflict

According to RIA Novosti's report on March 31, Russian President Putin signed a decree on March 31 to use the Russian ruble to settle natural gas transactions with "unfriendly countries." According to the provisions of the decree, Russia will fully use the ruble to settle natural gas transactions with buyers listed as "unfriendly countries and regions" from April 1.

Putin said at the same day's meeting on the aviation industry, "We have provided a clear and transparent plan for the traders from these (unfriendly) countries. If they want to buy Russian gas, they must open a ruble account with a Russian bank. These accounts will be used to pay for natural gas supplies starting tomorrow, April 1 this year. "

According to the latest decree, buyers from the list of unfriendly countries will have to open accounts in specific currencies and rubles with Gazprombank and then make payments in foreign currency. The foreign currency will be converted into rubles in transactions on the Moscow Exchange at the buyer's request, and these funds will then be deposited into the ruble account. Then, the ruble account will be used to transfer funds to the suppliers.

As soon as the news came out, natural gas prices rose rapidly. The Benchmark of the Dutch TTF Natural Gas May Contract was once again close to 130 euros, up 6% to 127.37 euros/MWh. However, the offer did not break the previous high in early March.

The original concept of this scheme was proposed by Russian President Vladimir Putin on March 23. Putin also noted that gas transactions with all "unfriendly countries" would be settled in rubles instead. Putin said, "It no longer makes sense for us to deliver goods to the EU and the U.S. and accept payments in USD, EUR, and some other currencies." Both the EU and the U.S. are on Russia's approved unfriendly list.

1. Putin's "Buying Gas in Rubles"

Among these "unfriendly countries," the EU is more dependent on Russian energy, especially natural gas. According to Eurostat's data, Russia will be the largest supplier of natural gas to the EU in 2020 and H1 in 2021. Meanwhile, six member states - Belgium, Germany, Spain, France, Italy, and the Netherlands - have a high dependence on Russian energy (oil and gas), among which Germany, Italy, and the Netherlands are the main importers of Russian gas.

In contrast, Europe's low gas production makes it difficult for it to be "self-sufficient" like the U.S. and impose an energy embargo on Russia. According to the BP Statistical Review of World Energy 2021, Europe will produce 218.6 billion cubic meters of natural gas in 2020, accounting for only 5.7% of global production. It should be noted that in BP's statistical classification, Russia is not included in "Europe" but in the "CIS countries."

According to statistics, between February 24 and March 31, EU member states have paid nearly 22.9 billion euros to Russia for fossil energy, of which 14.4 billion euros were spent on natural gas.

Radio France Internationale quoted its statement on RTL radio as saying, "We know how to get Russian oil and diesel alternatives, but for gas, we have no solution."

Following Putin's statement, EU energy importers, represented by Germany and France, have refused to settle in rubles. The initial statements, which mainly condemned Russia for breach of contract, said that most existing gas purchase agreements were settled in EUR or USD and would not consider Russia's request to ask the EU and the U.S. to settle in rubles.

This decision of Russia is related to financial sanctions imposed by Western countries. Since the conflict between Russia and Ukraine, western countries have jointly taken a series of financial sanctions against Russia, such as freezing assets, kicking some of its banks out of the SWIFT system, the global payment, and transfer system, and restricting the gold transactions of the Central Bank of Russia.

We believe that Russia's decision to change its payment currency is a countermeasure to the freezing of foreign exchange reserves of Russian banks by EU member states. On the other hand, after the Russia-Ukraine conflict, the USD-RUB exchange rate once exceeded 120 on the Moscow Exchange, and the ruble rate fell by almost 60% compared to the pre-conflict period. After Putin proposed the "buying gas in rubles" scheme, the Central Bank of Russia resumed its initiative to buy gold at a fixed price, and with the progress of Russia-Ukraine negotiations, the ruble exchange rate has returned to the level before the sanctions by Europe and the U.S.

2. Europe Struggles to Handle It

Europe Struggles to Handle Putin's Countermeasure of "Buying Gas in Rubles" _1

Faced with the sudden scheme of "buying natural gas in rubles", European countries' concerns about the interruption of natural gas supply have further intensified. On March 23, the price of natural gas, which had already reached the top and dropped, rose rapidly. The Benchmark of Dutch TTF Natural Gas April Contract closed at 117.317 euros/MWh, up 18%. In the two years before the Russia-Ukraine conflict, the price of this futures contract was below 50 euros/MWh for a long time.

Faced with soaring energy prices, coupled with the need to get rid of dependence on Russian energy and strengthen energy security, the EU and many European countries led by Germany are also eagerly looking for a way out. According to the International Energy Agency (IEA), the EU imported 155 billion cubic meters of natural gas from Russia in 2021.

In March, the European Commission (EC) proposed initiatives such as the REPowerEU plan and legislative proposals for a minimum 80% gas reserve, which is intended to gradually make Europe independent from its dependence on Russian fossil energy by 2030, starting with natural gas. The short-term goal, on the other hand, is to reduce the EU's demand for Russian gas by two-thirds by the end of 2022 through a variety of means, including seeking to diversify gas supplies.

To this end, the EC announced on March 25 increased cooperation with the United States on energy security issues. It includes that the U.S. will strive to secure an additional supply of at least 15 billion cubic meters of LNG to the EU market in 2022. The U.S. and Europe are expected to ensure stable demand and supply until 2030 of at least 50 billion cubic meters of U.S. LNG. And the volume of 50 billion cubic meters per year accounts for one-third of current gas imports from Russia.

We believe that Europe has also made some progress in finding new suppliers of natural gas, but now it struggles to keep it on. European countries must work together through the federal governments, states, cities, companies, and individuals to cut off their dependence on Russian gas to some extent. This will be a huge and complicated problem. Meanwhile, expansion of renewable energy sources, continued reduction of consumption at all levels, diversification, and rapid increase of hydrogen energy require long-term advancement, which is difficult to accomplish in the short term. In addition, even if trade with U.S. natural gas companies is increased and strengthened, it will be difficult to replace the entire share of Russian gas that occupies Europe. It is predicted that Europe will be largely independent of Russian gas only by mid-2024 at the earliest.

Russia, on the other hand, is also adjusting its "buying gas in rubles" policy. Russia is reconsidering and adjusting internally after digesting the response of the Western countries that refused to pay in rubles, and the concessions it can make will further clarify the more detailed definition of "payment in rubles."

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Kevin Du

Bitcoin amidst war and uncertainty

After the outbreak of the conflict in Ukraine followed by a period of high inflation, mainly due to rising commodity prices, gas and oil in the lead.

After an initial period of adjustment due to Russia's invasion of Ukraine, the price of the cryptocurrency first consolidated at around $42,000, then broke through resistance at $45,000 and approached $50,000, which many believe is within reach in the short term.

What seems more and more evident is that recently Bitcoin has increased its correlation with the US stock indices and especially with the Nasdaq technology index.

However, there is still the wide-ranging debate that has been going on for some time between those who consider Bitcoin to be the new digital gold and therefore a valid anti-inflationary instrument and protection against moments of market turbulence and those who instead see cryptocurrencies as a speculative instrument on a par with shares, if not in some cases even more volatile.

The particular period of turbulence we are currently experiencing, which is clearly having a strong impact on world markets and the economy, seems to prove those who think that Bitcoin is a useful tool for hedging against the risks of high inflation and market crises right. The prices of the largest cryptocurrency have been rising for the past month (by around 7%) and there is every indication that the rise will continue.

Correlation between crypto and conflict

Certainly, the role that cryptocurrencies are playing in the conflict is playing an important part in the prices of the major cryptocurrencies. Both Ukraine and Russia seem to be choosing cryptocurrencies as an alternative to traditional currencies.

Russia is considering cryptocurrencies both as a means of stemming the burden of sanctions, including paying for gas supplies in Bitcoin, and as a means of overcoming the power of the dollar in the global financial arena.

Evgeny Grabchak, Russia's deputy energy minister, has in recent days proposed legalizing cryptocurrency mining in the country as soon as possible, so as to make Russia an important global hub for crypto.

Bitcoin Amidst War and Inflation: A Period of Great Uncertainty_1

Ukraine, for its part, has decided to legalize the use and possession of cryptocurrencies in the country, following the incredible success of its decision to accept aid in cryptocurrencies (the $100 million mark was exceeded in just a few days).

All these facts could suggest that the adoption of cryptocurrencies is set to grow, especially in light of an ever-changing world that will probably never be the same again.

For those who believe in financial gurus and billionaires dispensing advice on how to invest in the medium and long term, it may be useful to look at what Robert Kiyosaki said, author of one of the most successful financial best sellers in history: "Rich Father Poor Father".

A few weeks ago, he announced that he had invested in oil, gold, silver and especially Bitcoin precisely to cope with this hyperinflationary situation, which he believes is set to last.

Source: The Cryptonomist.

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Devin

The war in Ukraine has made the security of energy supply a top priority, increasing pressure in Europe to accelerate the transition to cleaner fuels, including hydrogen. This was one of the topics covered at the European Gas and Hydrogen Conference that took place in Vienna between 21-23 March. More recently the European Commission (EC) has reconfirmed yet again that, if anything, it is even more determined to reduce and eventually eliminate natural gas consumption in the EU as we approach 2030 and beyond.

High natural gas prices have made hydrogen competitive, increasing its importance as a clean fuel not just to decarbonise Europe, but also to ensure energy security. The greatest demand for green hydrogen is expected to be from the industrial, aviation and heavy-duty transport sectors. But a massive scale-up is needed to make a difference. This will require public-private partnerships and economic incentives. In order to get it started, it may also require mandating the minimum use of hydrogen in certain industries.

The EC put forward the block's Hydrogen Strategy in July 2020. But events in Ukraine have increased its prominence and ambition, outlined in a new plan, REPowerEU, released on 8 March. The EU has increased its target for hydrogen production from 5 million tonnes, to 20 million tonnes by 2030, which will require about 1000TWh (Terawatt-hours) of renewable energy – almost twice the amount generated in the EU today. An astonishing 10 million tonnes will have to be imported. This is part of measures to reduce the EU's gas consumption by 30 per cent by then, which is about 100 billion cubic metres.

With only about 1 per cent of the global hydrogen production being green, the challenge for production at this scale will be land availability to deploy renewables and abundant solar/wind renewable resources. That is where the Middle East – North Africa (MENA) and East Med regions come in. EC President Ursula von der Leyen outlined a plan to achieve this in November 2021. It involves 'scaling up the technology, establishing international collaboration, and partnering with industry and researchers', and investing in MENA's hydrogen sector, thus 'creating a new hydrogen market between the two shores of the Mediterranean'.

Gaseous fuels will contribute approximately 20 per cent of Europe's final energy consumption by 2050. But within this, the target is to reduce unabated natural gas consumption by 30 per cent by 2030 and by more than 80 per cent by 2050. This will be replaced by renewable and low-carbon gases, 40 per cent of which will be hydrogen – and, increasingly, green hydrogen.

Green hydrogen is produced by electrolysis, in other words, the splitting of water into hydrogen and oxygen using electricity from renewable sources. Even though this is a proven technology, it still requires further development for the safe storage and transportation of hydrogen. In order to accelerate this, the EU launched a €2 billion partnership with industry in November 2021 to promote research and development in green hydrogen. EU's 'Fit-for-55' package provides the basis to achieve transformational change, with the required regulatory framework now being put in place by the EC.

In order to promote the use of hydrogen, the EC is proposing preferential tax rates for the use of renewable and low-carbon hydrogen in a new 'Energy Taxation Directive.' The EC published its revised Renewable Energies Directive 'RED-II' proposals in July 2021. But it now proposes to update these to include an increase in the renewables target from 32 per cent now to 38-40 per cent by 2030. This would translate to 60-65 per cent renewables in electricity production by 2030. In addition, a more ambitious binding target has been set to reduce final and primary energy consumption by 36 per cent and 39 per cent over the same period.

The EC expects that implementation of such policies will lead to demand for green electricity increasing dramatically, to the extent that it is unlikely that it can be supplied fully from within the EU. Similarly, it is not certain that the EU will be able to secure sufficient supplies internally to meet the forecast demand for hydrogen.

These are likely to require interconnectivity and imports from regions with high renewables potential – wind and solar – such as MENA and the East Med. There are already projects in place to produce green hydrogen in Saudi Arabia and the UAE, not just for export, but also for internal consumption.

The country with the highest potential in the East Med region to respond to Europe's hydrogen needs is Egypt. The country is putting together a low-carbon hydrogen strategy with the help of EBRD that includes assessing existing and potential hydrogen production. EBRD will also help conduct a regulatory analysis and assessment of the changes needed to support the development of hydrogen supply and export chains in Egypt.

The Egyptian Government is expected to announce a $40 billion hydrogen strategy this year, which will include a production capacity of 1,400 Mega Watts by 2030. With at least five known active green hydrogen projects under development, it is already on the way.

With its expanding renewable energy capacity – targeting 42 per cent by 2035 – Egypt considers this to be an opportunity to become a leader in the region for the production, use and export of hydrogen. It already has one of the largest photovoltaic parks in the world, the Benban solar park which has a total capacity of 1.8 Giga Watts (or 1,800 Mega Watts). This is more than the electricity capacity of Cyprus.

The cheapest way to transport green hydrogen from the East Med to Europe is by subsea pipeline. Such a pipeline could also facilitate the transport of hydrogen produced in the Middle East. Cyprus can be part of these developments, but it must first develop its own long-term energy plan – to 2050 – that should include a green hydrogen strategy, based on EC directives, policies and requirements, and dovetails with regional developments.

Source: Cyprus Economic Society.

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Owen Li

Australia has formally signed a trade deal with India, with the two nations signalling an intention to forge closer trade ties.

The Australia-India Economic Cooperation and Trade Agreement was signed in a virtual ceremony by Trade Minister Dan Tehan and India's Minister of Commerce & Industry, Piyush Goyal, on Saturday.

Australia's Prime Minister Scott Morrison and his Indian counterpart Narendra Modi witnessed the virtual ceremony.

Morrison is expected to call a general election within days and has been eager to secure the trade deal before campaigning begins, having been in negotiations with India for a decade.

Speaking to reporters in Tasmania, Morrison said the agreement with the world's second most populous nation represented "one of the biggest economic doors there is to open in the world today".

"These are never all or nothing deals as far as we're concerned, we see all of these as the next step and the next step and the next step," he said, expressing both countries' intention to build closer trade links.

Morrison's government is seeking to diversify export markets and reduce Australia's dependence on its biggest trading partner China after diplomatic spats led to Beijing sanctioning certain Australian products.

The deal with India removes tariffs on more than 85 percent of Australian goods exports to India, worth 12.6 billion Australian dollars ($9.4bn), rising to almost 91 percent over 10 years.

Tariffs will be scrapped on sheep meat, wool, copper, coal, alumina, fresh Australian rock lobster, and some critical minerals and non-ferrous metals to India.

It will see 96 percent of Indian goods imports enter Australia duty-free.

Both countries would continue to work towards a full free trade agreement, the federal government said on Friday.

After signing the deal, Minister of Commerce & Industry Goyal said India wanted to progress a full free trade agreement with Australia in an "accelerated manner".

"Soon after this current agreement comes into force, we'll get down to cracking the whip on the next stage to make this a comprehensive economic partnership," he said.

Trade Minister Tehan said he was confident negotiations would advance even if the Morrison government was replaced at the upcoming national election.

Morrison lags in the polls leading up to the general election due in May.

"I have very strong hope, no matter who fills our chairs going forward, we'll be able to … build on this ground-breaking agreement," he said.