On the eve of its 63rd Independence Day, India has signed a Free Trade Agreement (FTA) with the Association of Southeast Asian Nations (ASEAN). The agreement that took around six years to negotiate will eliminate tariffs on some 4000 products by 2016. India also signed a Comprehensive Economic Partnership Agreement with South Korea earlier this month.
The India-ASEAN FTA will come into force on 1 January, 2010 and expects bilateral trade to reach $50 billion by 2010. Last year trade between the two was around $40 billion, making ASEAN India’s fourth largest trading partner after EU, US and China. The agreement however, leaves out India’s booming software and information technology trade, which is included in the one with South Korea. Last year India-South Korea trade had reached $15.6 billion, and the new FTA is expected to increase it further.
These agreements come at an opportune time as the China-ASEAN FTA is also set to become operative in 2010. The agreement with China will eliminate tariffs for 90% of products between China and ASEAN and increase the $231.12 billion trade. Though India-ASEAN trade will be lesser than that with China, it is definitely a step in the right direction.
In the 1990s India decided to aggressively increase trade and strategic relations with the South East Asian countries as part of its ‘Look East’ policy. The aim was to build upon its historical and cultural ties to expand markets, counter Chinese influence in the region and improve India’s standing as a regional power. Security concerns related to insurgency in India’s north-eastern states was also a factor in improving relations with the eastern neighbors, including Myanmar’s military junta. Former Prime Minister Narshimha Rao and A.B. Vajpayee looked at the East as an opportunity for India to grow economically and strategically. The region also has huge oil and natural gas resources which could help fulfill India’s growing energy needs. During the 2003 ASEAN summit A.B. Vajpayee said that the Asian region should take advantage of its role as a major manufacturing hub and a global provider of services. “The India-ASEAN partnership should energize this process to move us closer to our shared goal of making this truly the Asian century.”
India is also involved in other regional trade agreements and initiatives like South Asia Growth Quadrangle (SAGQ), South Asian Subregion for Economic Cooperation (SASEC), Bangladesh-India-Myanmar-Sri Lanka-Thailand-Economic Cooperation (BIMSTEC), and FTA with Thailand and Singapore.
