Australia and India have agreed to undertake a joint feasibility study into the merits of a free trade agreement (FTA) between the two countries, Australian Trade Minister Warren Truss announced Friday.

The FTA feasibility study will commence in late 2007 and is expected to be completed in 2009.

Truss said the study will provide an opportunity to consider the potential for benefits which might flow to Australia and India from an FTA.

"The study will examine the potential gains for both countries, in particular the impact a comprehensive and genuinely liberalizing FTA could have on promoting economic growth, trade in goods and services, investment and other commercial linkages," Truss said in a statement.

"The relationship between Australia and India has been one of rapid growth in trade and investment," he said.

"The FTA feasibility study is a natural extension of the Australian Government's efforts to look at ways to tap the potential of India's rise as a major economic power," he added.

Preliminary figures in 2006-07 financial year (July 1, 2006 to June 30, 2007) show India is now Australia's fourth largest merchandise export market, recording 10.1 billion Australian dollars (8.2 billion U.S. dollars) worth of exports.

Australia's two-way trade in goods with India reached 11.4 billion dollars (9.3 billion U.S. dollars) in 2006-07, making India the ninth-largest trading partner of Australia.