India-Asean FTA

  • India and 10-member bloc of South-East Asian nations have agreed to review their free trade agreement, signed in 2009, to make it more business-friendly and boost economic ties.
  • The two sides also decided to constitute a joint committee for this purpose.
  • This was agreed upon during the meeting between economic ministers of ASEAN and Commerce Minister Piyush Goyal in Bangkok during the 16th AEM -India consultations. (AEM- ASEAN economic ministers)
ASEANIndia-Asean FTA
  • The Association of SouthEast Asian Nations is a political and economic organisation of 10 SE Asian nations
  • It was formed in
  • Founding members were Indonesia, Malaysia, the Philippines, Singapore, and Thailand.
  • Current 10 members are: Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar (Burma), Vietnam
  • Aims: Accelerating economic growth, social progress, and sociocultural evolution among its members, Protection of regional stability and providing a mechanism for member countries to resolve differences peacefully
Background of India ASEAN relations
  • India’s engagement with the Association of SouthEast Asian Nations (ASEAN) started with its “Look East Policy” in the year 1991.
  • India became a sectoral dialogue partner of ASEAN in
  • ASEAN invited India to become its full dialogue partner during the fifth ASEAN summit in Bangkok in
  • India also became a member of the ASEAN Regional Forum (ARF) in 1996.
  • India and ASEAN have been holding summit level meetings on an annual basis since 2002.
About the ASEAN Free Trade Area
  • The initial framework of the agreement was signed on 8 October 2003 in Bali, Indonesia.
  • The FTA in goods was signed in August 2009 (Bangkok, Thailand).
  • The free trade area came into effect on 1 January 2010.
  • It paves the way to mutually eliminate tariffs on approximately 4,500 products in a time-bound manner.
  • India hosted the latest ASEAN-India Commemorative Summit in New Delhi on 26th January 2018.
  • In the financial year 2017-18, Indo-ASEAN bilateral trade grew by almost 14% to reach US$ 81.3 billion.
  • India's imports from ASEAN were valued at US$ 47.13 billion while its exports to ASEAN stood at US$ 34.2 billio
Issues with the FTA
  • The main issue is that the agreement has benefitted the ASEAN region more than India.
  • The domestic goods market is facing stiff competition because they have to compete with the cheaper goods of the ASEAN region.
  • For example, the rubber imports from Malaysia, palm oil imports from Indonesia have caused trouble for the local manufacturers of palm oil and rubber, especially the rubber plantations of Kerala who have complained of the cheaper imports ever since the agreement was about to be signed.
  • Agreement in services yet to be enforced - As per ASEAN rules, until all nations have not ratified the FTAs in their Legislatures, the FTA will not be enforced.
  • This has caused much trouble for India as Philippines hasn’t ratified the FTA in services as there will be direct competition in between India and the Philippines in services which would be a disadvantage for the latter.
  • Over the years, the trade imbalance in favour of ASEAN has dearly hurt India’s Current Account Deficit and thus, hurt India overall fiscally.
Way forward
  • In order to maximize the gains from the FTA, Asean and India must find mutually agreeable solutions to address the issue of standards.
  • At the same time, the two partners must consider taking facilitation measures that would help in reducing the cost of doing business.
  • In today’s world, economic relations cannot be strengthened without adequate focus being given to trade in services and investment.
  • Over the past two years, Asean and India have tried to resolve the issues that will help fast-track negotiations on services and investment.
  • An early conclusion of agreements in both of these areas can clear the way for expanding both countries trade in goods to its full potential.
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