India is aiming to address a growing trade imbalance with the Association of Southeast Asian Nations (ASEAN) by revamping its existing free trade agreement (FTA). A senior government official has highlighted the need for a review of the deal, citing concerns over tariff asymmetry and potential misuse.
The review, a key point in Prime Minister Narendra Modi’s 10-point plan for enhanced India-ASEAN cooperation, is expected to be completed by next year. Rajesh Agrawal, Additional Secretary in the Department of Commerce, stressed the urgency of the review, noting that India faces higher tariff elimination for lower-order economies within ASEAN while facing lower concessions from faster-growing major economies.
To achieve a more balanced FTA, India is exploring a country-wise approach to negotiations. This strategy would allow for greater flexibility in securing favourable terms, especially considering the diverse economic development levels within the 10-nation bloc.
However, the path to a revised deal is fraught with challenges. Indian industry has raised concerns over potential circumvention, whereby Chinese products are rerouted through ASEAN to benefit from preferential tariffs under the India-ASEAN FTA. This has led to calls for anti-subsidy measures to safeguard domestic industries.
The widening trade deficit between India and ASEAN, particularly exacerbated by the COVID-19 pandemic, has further intensified the need for a rebalanced trade relationship. India’s trade deficit with ASEAN surged to $44 billion in FY23, compared to $8 billion in FY13.
While ASEAN remains a crucial trading partner for India, accounting for approximately 11% of its global trade, the current FTA is seen as favouring ASEAN nations. India’s exports to ASEAN totalled $41.2 billion in 2023-24, while imports stood at $80 billion.
The review process has been slow, with significant delays in reaching an agreement on the scope of the revision. India is determined to leverage the review to address these concerns and ensure a more equitable and beneficial trade partnership with ASEAN.
