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Opportunities for Indian Manufacturers in ASEAN

Indian exports largely mirror those of ASEAN states, such as rice, electrical equipment, and clothing and accessories. However, there are still sectors where Indian exporters can potentially exploit market needs – wheat exports, the digital economy, and healthcare.

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Opportunities for Indian Manufacturers in ASEAN

The economic partnership between India and the Association of Southeast Asian Nations (ASEAN) has continued to strengthen since the economic relationship began in 1992 and with the ASEAN-India Free Trade Agreement (AIFTA) coming into effect in 2009.

The bloc has presented several opportunities for Indian manufacturers and exporters seeking long-term commitment. Total trade between India and ASEAN was valued at US$86 billion in 2020, a reduction from US$97 billion in 2018-19 due to the pandemic. However, this was an increase from the 2017 total trade value of US$59 billion, indicating an upward trajectory only arrested by the pandemic.

Furthermore, according to India’s Commerce and Industry minister, India-ASEAN trade has the potential to reach US$300 billion by 2025.

Indian exports largely mirror those of ASEAN states, such as rice, electrical equipment, and clothing and accessories. However, there are still sectors where Indian exporters can potentially exploit market needs – wheat exports, the digital economy, and healthcare.

Since its inception, both regions have made efforts to progressively eliminate trade tariffs on 80 percent of tariff lines. India has excluded 590 tariff lines from the list of tariff elimination and 489 tariff lines from the list of tariff concessions for agriculture, automotive, textiles, petrochemicals, crude and refined palm oil, tea, coffee, and pepper, among others.

ASEAN has also lowered intra-regional tariffs through the Common Effective Preferential Tariff (CEPT) Scheme on exports under the FTA. This means Indian goods and raw material exporters to ASEAN are more competitive.

Many industry bodies in India, however, have complained that AIFTA provides better market access for ASEAN trade into the country, but Indian businesses do not enjoy the same access to such reduced tariffs.

Despite the size and potential of the ASEAN market, India still suffers from a trade deficit, which stood at US$24 billion in 2020. As such, India is keen to renegotiate the terms of AIFTA to level the trade balance.

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This article was first published by AseanBriefing which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to info@dezshira.com.

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