India-ASEAN Free Trade Agreement (FTA)

The India-ASEAN Free Trade Agreement (FTA) is a trade pact between India and the Association of Southeast Asian Nations (ASEAN), which includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. The agreement was signed on August 13, 2009, and came into force on January 1, 2010.

Background

India and ASEAN have a long history of trade and cultural ties. In 2003, India became a sectoral dialogue partner of ASEAN, and in 2004, it became a summit-level partner.

The FTA was a natural progression of this growing relationship, aimed at enhancing economic cooperation and integration between the two regions.

Key Features

• Tariff Reduction: The agreement aims to reduce and eliminate tariffs on a substantial number of goods traded between India and ASEAN countries.
• Rules of Origin: The FTA establishes rules of origin to ensure that only goods originating from India or ASEAN countries benefit from the preferential tariffs.
• Trade in Services: The agreement covers trade in services, aiming to promote greater cooperation and liberalization in sectors such as telecommunications, tourism, and professional services.
• Investment: The FTA seeks to create a conducive environment for investment flows between India and ASEAN countries.

Impact on Trade

Since the implementation of the FTA, trade between India and ASEAN has grown significantly. In 2020-21, despite the COVID-19 pandemic, ASEAN was India’s fourth-largest trading partner, with bilateral trade valued at US$ 78.9 billion. India’s exports to ASEAN stood at US$ 31.5 billion, while imports from ASEAN were US$ 47.4 billion.

Recent Developments

India and ASEAN are currently working on further enhancing their economic ties through the Regional Comprehensive Economic Partnership (RCEP), a proposed free trade agreement involving the 10 ASEAN countries, along with India, China, Japan, South Korea, Australia, and New Zealand. However, India opted out of the RCEP in November 2019, citing concerns over the agreement’s potential impact on its domestic industries and the trade deficit with China.