Model Answer
0 min readIntroduction
India and the Association of Southeast Asian Nations (ASEAN) share a long-standing historical and geographical connection, fostering a robust economic partnership. The relationship gained significant momentum with India’s ‘Look East’ policy in 1992, evolving into the ‘Act East’ policy in 2014, emphasizing enhanced connectivity and cooperation. ASEAN, comprising Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam, represents a significant economic bloc with a combined GDP of over $3.6 trillion (World Bank, 2022 - knowledge cutoff). Indo-ASEAN trade relations have grown substantially, becoming a vital component of India’s foreign trade and economic strategy.
Historical Evolution of Indo-ASEAN Trade
Initially, India’s engagement with ASEAN was limited. However, the ‘Look East’ policy marked a turning point, focusing on economic integration and political dialogue. This led to India becoming a Sectoral Dialogue Partner in 1992, a full Dialogue Partner in 1996, and finally a member of the ASEAN Regional Forum (ARF) in 1996. The establishment of the India-ASEAN Free Trade Area (FTA) in goods in 2015 was a landmark achievement, reducing tariffs and promoting trade liberalization.
Current Status of Indo-ASEAN Trade
Currently, ASEAN is one of India’s largest trading partners. In FY23, India-ASEAN trade reached approximately $111.4 billion (Ministry of Commerce & Industry, 2023). Key commodities traded include:
- Indian Exports to ASEAN: Petroleum products, gems and jewellery, machinery, pharmaceuticals, chemicals.
- Indian Imports from ASEAN: Electronics, palm oil, mineral fuels, organic chemicals, plastics.
Singapore, Indonesia, Thailand, and Malaysia are major trading partners within ASEAN. Services trade is also growing, particularly in IT and tourism.
Challenges in Indo-ASEAN Trade
Despite the positive trajectory, several challenges hinder further growth:
- Non-Tariff Barriers (NTBs): Complex regulations, sanitary and phytosanitary measures, and technical barriers to trade continue to impede trade flows.
- Infrastructure Deficiencies: Inadequate infrastructure in some ASEAN countries, particularly in Myanmar and Cambodia, limits connectivity and increases transportation costs.
- Political Instability: Political instability in Myanmar poses risks to trade and investment.
- Competition from China: China’s strong economic presence and established trade relationships with ASEAN countries present significant competition for India.
- Limited Connectivity: While improving, connectivity (road, rail, maritime) remains a constraint.
Recent Initiatives and Future Prospects
The Indian government is actively pursuing initiatives to strengthen Indo-ASEAN trade:
- ‘Act East’ Policy: Focuses on enhanced connectivity through projects like the India-Myanmar-Thailand Trilateral Highway.
- Review of India-ASEAN FTA: Ongoing discussions to address existing imbalances and expand the scope of the FTA to include services and investment.
- Digital Connectivity: Promoting digital trade and cooperation in areas like fintech and e-commerce.
- India-ASEAN Business Council: Facilitating business-to-business interactions and identifying new opportunities.
- ASEAN-India Economic Ministers’ Meeting: Regular meetings to discuss trade and investment issues.
The Regional Comprehensive Economic Partnership (RCEP), while India is not a signatory, impacts the trade dynamics in the region. India is exploring alternative avenues for deeper economic integration with ASEAN.
| Year | Milestone |
|---|---|
| 1992 | India becomes a Sectoral Dialogue Partner with ASEAN |
| 1996 | India becomes a full Dialogue Partner and joins the ASEAN Regional Forum (ARF) |
| 2015 | India-ASEAN FTA in goods comes into effect |
| 2022 | India-ASEAN trade reaches approximately $111.4 billion |
Conclusion
Indo-ASEAN trade relations have witnessed significant progress, driven by the ‘Look East’ and ‘Act East’ policies and the establishment of the FTA. While challenges remain, ongoing initiatives to enhance connectivity, address NTBs, and promote digital trade offer promising prospects for further growth. India’s strategic focus on ASEAN is crucial for its economic and geopolitical interests in the Indo-Pacific region. A proactive approach towards resolving trade barriers and fostering deeper economic integration will be key to unlocking the full potential of this vital partnership.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.