Patience Please: India’s ASEAN Journey Has Much Further To Go

Context: India’s Free Trade Agreement (FTA) with the Association of South-East Asian Nations (ASEAN) has resulted in expansion of trade; however, it is marred with some concerns that need to be addressed.

Benefits accrued from FTA between India and ASEAN members

• Increased bilateral trade: Since 2010, when the ASEAN-India FTA for goods was activated, trade between the two partners has almost doubled to reach over $87 billion in 2019-20. 
• Bilateral trade between ASEAN and India is 11% of India’s global trade (up marginally by 1% from 2010-11 to 2019-20).
• Export share: For every $100 of global exports by India, $10.56 came from ASEAN in 2019
• Import Dependency: For every $100 imported by India, $11.89 came from ASEAN in 2019.

Concerns associated with developing FTA’s with ASEAN

• Recent slowdown: Amid persistent trade tensions and moderation in global economic growth.
• Policy uncertainties and anti-globalization measures: reducing Foreign Direct Investment (FDI) flows.
• India’s widening current account deficit: Though there is a capital account surplus, the net effect of both current and capital accounts is not in favour of India. 
• Non-tariff barriers: hurting the expansion of value-chain linkages.
• Slow progress in the services sector: India faces discriminatory standards applied by ASEAN countries to Indian service providers, and vice versa.

Way forward

• Today’s deficit to tomorrow’s surplus: A review of the ASEAN-India FTA in goods is a welcome step.
• Maintain export competitiveness in global and regional markets by improving trade facilitation, not only at home but also with trade partners.
  • Addressing matters related to sensitive lists, non-tariff measures, and customs cooperation.
• Develop value chains: Private sector must work out new deals to enhance ASEAN-India relations.
• Restore the connectivity and resilience of supply chains: Utilise Supply Chain Resilience Initiative (SCRI) between India, Japan and Australia to facilitate investment (including ASEAN in it).
• Regional cooperation: For economic stability, competitiveness, growth and integration in the region.