As India seeks to strengthen its economic ties with the Association of Southeast Asian Nations (ASEAN), concerns are growing over the imbalance in the India-ASEAN Free Trade Agreement (FTA). Prime Minister Narendra Modi recently outlined a 10-point plan to enhance cooperation between the two sides, highlighting the need to address the growing trade deficit and the increasing influence of Chinese products in the region.
A Shifting Trade Landscape
Since the India-ASEAN FTA was signed in 2009, ASEAN has emerged as a significant source of raw materials for Indian industries. However, the trade balance has progressively tilted in favour of ASEAN, with India facing a burgeoning trade deficit. The situation has been exacerbated by the COVID-19 pandemic and the subsequent global economic disruptions.
Furthermore, India’s decision to opt out of the Regional Comprehensive Economic Partnership (RCEP) in 2019, a mega-regional trade deal led by China, has left India at a disadvantage. China’s growing economic influence in the region, coupled with its deeper integration with ASEAN through RCEP, has raised concerns about the potential for Chinese products to be rerouted through ASEAN to enter the Indian market.
India’s Strategic Concerns
Indian industry has been increasingly vocal about the need for anti-subsidy measures against industrial imports from ASEAN, citing concerns over unfair competition from Chinese products. The government has also initiated anti-dumping investigations against certain steel products from Vietnam, underscoring its determination to protect domestic industries.
Experts and policymakers have emphasised the need for a comprehensive review of the India-ASEAN FTA to address these concerns and ensure a more balanced trade relationship. While the two sides agreed to initiate a review in 2019, the process has been slow, raising doubts about its effectiveness.
The Road Ahead
As India strives to strengthen its economic ties with ASEAN, it is imperative to address the growing trade deficit and the challenges posed by China’s increasing influence. A timely and comprehensive review of the India-ASEAN FTA, coupled with effective implementation of anti-dumping and anti-subsidy measures, will be crucial in safeguarding India’s economic interests and ensuring a level playing field for domestic industries.
