Examine the economic contours and associated problems with ASEAN-India relationship.

The economic relations of India and ASEAN basically revolve around the India-ASEAN free trade agreement and negotiations on RCEP. The FTA is in force since 2010 and currently negotiations going on towards a full fledged CEPA. Under the FTA, India and ASEAN have reduced tariffs on most goods. The ASEAN nations are largely export driven economies and have very high export to GDP ratio. This has resulted in increased access for ASEAN in India’s merchandize market but relatively lesser advantages for India in ASEAN’s goods market, mainly due to Indian goods being less competitive. Since beginning, India has been pushing for a free trade agreement in services as India has relatively advantageous position in services exports, including skilled services. But so far this has not happened.
The trade between India and ASEAN has also seen India markets flooding with inexpensive imports in farm sector also. For example, the palm oil import from Malaysia has given a blow to Indian Palm Oil economy. To alleviate the losses that arise from the initial stages of trade, the Government of India must be able to effectively redistribute some of the wealth to those industries who suffer from the increased competition with ASEAN markets. This way, total welfare gains in India would increase and India would ultimately benefit from trade with ASEAN.
RCEP negotiations started in 2013 with 10 economies of the ASEAN region and six of its free trade partners—Australia, China, India, Japan, New Zealand and South Korea. Indian Government is facing huge opposition in implementing RCEP from local industry particularly in steel and textiles because on an average the tariff elimination offered by India was around 70-75 per cent which is high when compared with other countries in RCEP

Topics: GS-II: Bilateral Regional and Global Groupings and Agreements