Introduction
India-ASEAN bilateral trade surpassed $120 billion in FY24, underscoring deep commercial ties; however, the partnership is increasingly strained by a structural trade deficit that widened from $4.98 billion in 2010-11 to $45.20 billion in 2024-25. Operationalised in 2010 under executive treaty powers, the ASEAN-India Trade in Goods Agreement (AITIGA) requires a comprehensive review to address asymmetries and align international commitments with domestic economic interests.
Structural Challenges Under AITIGA
A decade and a half of AITIGA implementation has created imbalances in merchandise trade that disadvantage Indian manufacturing and exports:
- Tariff Asymmetries: Under the agreement, India eliminated or substantially reduced duties on approximately 74% of tariff lines. In contrast, several key ASEAN economies like Singapore already maintained near-zero Most Favoured Nation (MFN) tariffs, yielding disproportionately smaller market access gains for Indian exporters.
- Circumvention via Weak Rules of Origin (RoO): Inadequate origin verification protocols have allowed third-party goods—notably subsidised Chinese products such as steel, chemicals, and consumer electronics—to be transshipped through ASEAN member states with minimal processing, undermining domestic industries.
- Persistent Non-Tariff Barriers (NTBs): Indian exporters face non-transparent Technical Barriers to Trade (TBT) and stringent Sanitary and Phytosanitary (SPS) measures across ASEAN markets. These include protracted product registration cycles for generic pharmaceuticals, arbitrary testing requirements for bovine meat, and opaque certifications for agricultural goods.
Measures to Make Bilateral Trade Balanced and Mutually Beneficial
A comprehensive review of AITIGA must integrate regulatory, legal, and commercial remedies to foster reciprocal market integration:
- Enforce Rigorous Origin Verification: Modernise the Rules of Origin by mandating Product-Specific Rules (PSRs) and enforcing minimum domestic value-addition criteria (such as a 35% threshold). These requirements should be stringently backed by Section 28DA of the Customs Act and domestic CAROTAR (Customs Administration of Rules of Origin under Trade Agreements) Rules, 2020.
- Establish Mutual Recognition Agreements (MRAs): Institutionalise MRAs covering conformity assessments, pharmacopoeial standards, and digital phytosanitary certifications. Accelerating regulatory approvals for Indian pharmaceuticals and organic agricultural produce will dismantle non-tariff blockages.
- Incorporate Robust Trade Defence Mechanisms: Update AITIGA to introduce transitional bilateral safeguards and Tariff-Rate Quotas (TRQs) to protect vulnerable domestic micro, small, and medium enterprises (MSMEs) against sudden, predatory import surges, maintaining harmony between international trade commitments and domestic economic security.
- Link Goods Renegotiations with Services and Digital Trade: Leverage India's comparative advantage in services by linking AITIGA reviews with Mode 4 professional mobility agreements, while expanding cross-border real-time digital payment linkages, such as interoperability between India's UPI and Singapore's PayNow, across the wider ASEAN bloc.
Conclusion
A modernized, rules-based, and non-discriminatory AITIGA will rectify existing trade imbalances while curbing predatory circumvention. Making bilateral commerce equitable and mutually rewarding is vital to anchoring India's Act East Policy in enduring regional economic integration and supply chain resilience.