Do you agree with the view that huge imbalance in India-ASEAN trade has rendered the free trade agreement between India and ASEAN irrelevant? What are the major reasons for this imbalance? Discuss giving suitable suggestions. |

Published: August 28, 2017

With a total trade of $70 billion, ASEAN is India’s fourth largest trading partner. This is almost 11% of India’s overall global trade of $660 billion. However there is a huge trade deficit approximately $10 billion, while export to ASEAN are of $31 billion imports are of $40 billion, creating an adverse trade balance.
Reasons for trade imbalance
The biggest deficit is in case of Indonesia. Under the existing trade agreement, tariff elimination committed by Indonesia is the least in comparison to other ASEAN member States. As per Parliamentary Standing Committee on Commerce increasing trade deficit is due to imports of essential commodities coal, petroleum and edible oils. Also as per committee, Indian agricultural products face high import tariffs and barriers, while in case of import of cheap processed food products from ASEAN countries there are concerns about poor quality. Another reason is the imposition of safeguards and non-tariff barriers by ASEAN nations on exports of India’s textiles and pharmaceuticals.
What should be done to improve trade balance
As per committee, In order to improve the trade balance, India need better market access for goods where India has an edge over ASEAN, like leather goods and pharmaceuticals. There is a need to improve India’s access to services trade in ASEAN. Also, there should be appropriate quality norms import of processed food products. There is a need to increase the footprint of Indian financial institutions in the region.
Appropriate remedial measures should be taken against non-tariff barriers & safeguard measure coming in the way of exports of pharmaceutical & textile products.
Trade with ASEAN is of strategic importance to India, this will also boost investments in the northeastern states of the country”. In order to tap full business potential, there is a need to fast-track the connectivity corridors and trade corridors.

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