India is strengthening its ties with ASEAN partners to reboot and enhance cooperation in key areas like trade, security, and cultural exchange. With shared interests in maintaining peace, boosting economic growth, and improving connectivity in the Indo-Pacific region, India and ASEAN countries are working closely to build a more dynamic and mutually beneficial relationship. This renewed focus aims to tackle common challenges, promote regional stability, and open up new opportunities for collaboration in technology, infrastructure, and people-to-people connections.
Tags: GS – 2, IR- India and its Neighbourhood– Regional Groupings- Groupings & Agreements Involving India – Look East to Act East
Context:
- Indian Prime Minister’s upcoming visit to Singapore is set to elevate the India-Singapore partnership. Both countries will unveil several agreements, including a key one on developing a semiconductor ecosystem.
- This visit builds on recent “new anchors” identified in the India-Singapore Ministerial roundtable and highlights Singapore’s role as India’s largest ASEAN trade partner and top foreign direct investor.
- Strengthening ties with Singapore is crucial for India’s broader ‘Act East’ policy and its strategic influence in the Indo-Pacific region.
What is the Significance of ASEAN for India?
- Historical Context and Elevation of Partnership:
- 1992: India became a Sectoral Dialogue Partner with ASEAN, marking the beginning of formal engagement.
- 1995: The partnership was elevated to a Dialogue Partner, enhancing interactions to the Foreign Minister level.
- 2002: The relationship was further upgraded to Summit level with the first Summit held in 2002.
- 2012: At the 20-year Commemorative Summit in New Delhi, the Dialogue Partnership was upgraded to a Strategic Partnership.
- 2018: During the 25-year Commemorative Summit, India and ASEAN focused on maritime cooperation.
- 2022: The 30-year anniversary of ASEAN-India relations was celebrated as ASEAN-India Friendship Year, culminating in the elevation of the Strategic Partnership to a Comprehensive Strategic Partnership.
- Economic Powerhouse – Gateway to Southeast Asian Markets:
- ASEAN provides India access to a market of over 650 million people with a combined GDP of USD 3.2 trillion.
- The ASEAN-India Free Trade Area has increased bilateral trade to USD 110.39 billion in 2021-2022.
- ASEAN accounts for 11% of India’s global trade, with Singapore being India’s largest trade partner in ASEAN and 6th largest globally, also the largest source of FDI valued at USD 11.77 billion in the last financial year.
- Strategic Counterbalance:
- Amid rising geopolitical tensions, especially with China, ASEAN is a crucial strategic partner for India.
- India’s ‘Act East Policy’ aligns with ASEAN’s ‘Outlook on the Indo-Pacific,’ promoting regional stability.
- The elevation to a Comprehensive Strategic Partnership in 2022 highlights this alignment.
- Engagement in forums like the East Asia Summit and ASEAN Regional Forum allows India to assert its role as a net security provider and counter Chinese influence.
- Connectivity Catalyst:
- ASEAN plays a pivotal role in India’s vision of enhanced regional connectivity.
- Projects like the India-Myanmar-Thailand Trilateral Highway and the Kaladan Multi-Modal Transit Transport Project underscore India’s commitment, despite delays.
- Digital connectivity, including 5G and cybersecurity, strengthens links and represents strategic investments comparable to China’s Belt and Road Initiative.
- Cultural Confluence:
- The historical and cultural ties between India and Southeast Asia offer a foundation for soft power diplomacy.
- Initiatives such as the ASEAN-India Artists’ Camp and Music Festival celebrate this shared heritage.
- The ASEAN-India Network of Universities, established in 2022, further enhances academic and cultural exchanges, crucial for public diplomacy and influence in the region.
- Technological Synergy:
- ASEAN’s rapidly digitalizing economies present opportunities for India’s IT sector and start-ups.
- The ASEAN-India Start-up Festival highlights collaboration in fintech, e-commerce, and AI.
- The ASEAN-India Science and Technology Development Fund, with a recent USD 5 million boost, supports joint research in advanced fields.
- Maritime Security Collaboration:
- ASEAN is key to India’s maritime security strategy, particularly in the Indo-Pacific region.
- Collaboration on piracy, illegal fishing, and disaster management through forums like the ASEAN Regional Forum and Expanded ASEAN Maritime Forum aligns with India’s SAGAR (Security and Growth for All in the Region) doctrine.
- The inaugural ASEAN-India Maritime Exercise was held in the South China Sea in May 2023.
- Energy Security and Sustainability:
- ASEAN’s energy-rich members offer India opportunities to diversify its energy sources, vital for its growing economy.
- India’s expertise in renewable energy, particularly solar power, complements ASEAN’s sustainability goals.
- The recent ASEAN-India High-Level Conference on Renewable Energy exemplifies this synergy, with cooperation in semiconductors, clean energy technologies, and sustainable practices.
- Supply Chain Resilience:
- Post-COVID, ASEAN has become a key partner in India’s efforts to build resilient supply chains.
- The pandemic revealed vulnerabilities in global supply networks, prompting a re-evaluation of dependence on single sources.
- Cooperation in sectors like pharmaceuticals, electronics, and automobiles supports diversified and robust supply chains, aligning with broader initiatives like the Supply Chain Resilience Initiative (SCRI) involving India, Japan, and Australia.
Key Concerns in India-ASEAN Relations:
- Trade Imbalance:
- India’s trade deficit with ASEAN has more than doubled since the Free Trade Agreement (FTA) implementation in 2010.
- The deficit is notably high in the electronics and machinery sectors.
- In FY 2022-2023, India’s exports to ASEAN were USD 44.04 billion, while imports reached USD 87.58 billion.
- Infrastructure Connectivity:
- Despite advancements in digital and cultural connectivity, physical infrastructure links remain underdeveloped.
- The India-Myanmar-Thailand Trilateral Highway has faced significant delays, and the Kaladan Multi-Modal Transit Transport Project has encountered challenges.
- These delays impede trade flows and people-to-people connections.
- Geopolitical Balancing – Navigating the China Factor:
- China’s growing influence in Southeast Asia challenges India-ASEAN relations.
- ASEAN members are balancing Chinese economic inducements with security concerns.
- India’s role as a counterbalance to China, through initiatives like the Quad Alliance, faces mixed responses from ASEAN countries.
- The South China Sea dispute complicates this dynamic, with countries like Vietnam and the Philippines welcoming India’s active role, while others are more cautious.
- Regulatory Hurdles:
- Divergent regulatory standards between India and ASEAN countries create non-tariff barriers to trade and investment.
- Differences in food safety standards and certification processes hinder agricultural trade.
- Lack of mutual recognition agreements in professional services limits the movement of skilled professionals.
Why India Continues to Face a Trade Deficit with ASEAN
- Tariff Asymmetry:
- The ASEAN-India Free Trade Agreement (AIFTA) features asymmetric tariff reductions, disadvantages in India.
- India has reduced tariffs on about 74% of its tariff lines for ASEAN, while ASEAN has reciprocated on only 56%.
- This imbalance, particularly in agriculture and textiles, has contributed to a trade deficit, which reached USD 25.76 billion in 2021-22.
- Non-Tariff Barriers:
- ASEAN countries impose non-tariff barriers (NTBs) that hinder Indian exports.
- Examples include complex regulatory requirements, stringent sanitary and phytosanitary measures, and technical barriers.
- Indian pharmaceutical exports face costly registration processes, and agricultural products often struggle with food safety standards.
- Manufacturing Competitiveness:
- ASEAN countries, such as Vietnam and Thailand, have advanced manufacturing sectors with higher productivity.
- India’s lower labour productivity and higher logistics costs (14% of GDP compared to 5-10% in ASEAN) contribute to competitiveness gaps.
- For example, exports to Vietnam were USD 5.47 billion, while imports amounted to USD 9.34 billion.
- Missing Link in Regional Value Chain:
- India’s limited integration into ASEAN-centric regional value chains worsens the trade imbalance.
- ASEAN countries are key nodes in global supply chains, especially in electronics and automotive sectors.
- India’s minimal participation in these networks limits its ability to capture value-added exports to ASEAN and beyond.
- Services Trade Barriers:
- India excels in services, especially IT and ITeS, but faces barriers in ASEAN markets.
- Language barriers, lack of mutual recognition agreements for qualifications, and data localization requirements restrict India’s services exports.
- Rules of Origin Exploitation:
- Weak rules of origin in AIFTA allow non-ASEAN countries, particularly China, to route exports to India through ASEAN, worsening the trade deficit.
- This ‘trade deflection’ inflates the deficit and undermines India’s efforts to reduce dependence on Chinese imports.
Measures to Enhance India-ASEAN Relations
- Recalibrating the ASEAN-India Free Trade Agreement (AIFTA):
- Comprehensive Review: India should advocate for a thorough review of AIFTA to address trade imbalances.
- Balanced Tariff Reductions: Negotiate more equitable tariff reductions, focusing on sectors where India holds a competitive edge, such as pharmaceuticals, textiles, and IT services.
- Phased Reductions: Propose gradual tariff reductions on sensitive agricultural products and seek improved market access for India’s services sector.
- Enhancing Infrastructure Connectivity:
- Accelerate Key Projects: Speed up completion of major projects like the India-Myanmar-Thailand Trilateral Highway and extend it to Cambodia, Laos, and Vietnam.
- Connectivity Master Plan: Propose a comprehensive plan aligned with ASEAN’s Connectivity Master Plan 2025, including digital connectivity initiatives like the India-ASEAN submarine cable project.
- Boost Trade: Timely project completion could potentially increase India-ASEAN trade by 20-30% in the medium term.
- Boosting Manufacturing Competitiveness:
- Sector-Specific Interventions: Focus on specific sectors where India’s competitiveness can be enhanced.
- Expand PLI Scheme: Extend the Production Linked Incentive (PLI) scheme to more industries relevant to ASEAN trade.
- Joint Manufacturing Initiatives: Develop joint manufacturing projects, such as an India-Vietnam electronics hub, leveraging strengths in software and hardware.
- Enhancing Energy Cooperation:
- ASEAN-India Energy Partnership: Propose a partnership focusing on energy security, clean energy transition, and technology cooperation.
- Joint Research: Initiate joint research on renewable technologies, green hydrogen, and energy storage to support sustainable development goals.
- Enhancing Strategic and Defense Cooperation:
- Maritime Security: Deepen strategic engagement with ASEAN in maritime security.
- Capacity Building: Offer increased assistance in maritime domain awareness, anti-piracy, and humanitarian relief.
- Defence Production: Consider joint defence production initiatives with advanced ASEAN countries like Singapore and Indonesia.
- Aligning on Climate Change and Sustainability:
- ASEAN-India Green Partnership: Propose a partnership focusing on climate change mitigation and sustainable development.
- Technology Transfer: Transfer technologies in solar energy and conduct joint research on climate-resilient agriculture.
Conclusion
India’s engagement with ASEAN, particularly through its partnership with Singapore, reflects a significant shift towards deeper economic, technological, and security collaborations. By addressing trade imbalances and expanding cooperation in strategic sectors, India can maximise the benefits of its evolving relationship with ASEAN.
UPSC Civil Services Examination, Previous Year Questions (PYQs)
Prelims
Q1. India is a member of which among the following? (2015)
- Asia-Pacific Economic Cooperation
- Association of South-East Asian Nations
- East Asia Summit
Select the correct answer using the code given below:
- 1 and 2 only
- 3 only
- 1, 2 and 3
- India is a member of none of them
Ans: (b)
Q2. Consider the following countries: (2018)
- Australia
- Canada
- China
- India
- Japan
- USA
Which of the above are among the ‘free-trade partners’ of ASEAN?
- 1, 2, 4 and 5
- 1, 4, 5 and 6
- 1, 3, 4 and 5
- 2, 3, 4 and 6
Ans: (c)
Q3. The term ‘Regional Comprehensive Economic Partnership’ often appears in the news in the context of the affairs of a group of countries known as (2016)
- G20
- ASEAN
- SCO
- SAARC
Ans: (b)
Q4. In the Mekong-Ganga Cooperation, an initiative of six countries, which of the following is/are not a participant/ participant? (2015)
- Bangladesh
- Cambodia
- China
- Myanmar
- Thailand
Select the correct answer using the code given below:
- 1 only
- 2, 3 and 4
- 1 and 3
- 1, 2 and 5
Ans: (c)
Mains
Q:1 Evaluate the economic and strategic dimensions of India’s Look East Policy in the context of the post-Cold War international scenario. (2016)
FAQs
Q: What is ASEAN, and why is it important for India?
- Answer: ASEAN (Association of Southeast Asian Nations) is a regional group of 10 Southeast Asian countries. It is important for India because of its strategic location, economic ties, and opportunities for cooperation in areas like trade, security, and cultural exchange.
Q: Why is India rebooting its relations with ASEAN?
- Answer: India is rebooting its relations with ASEAN to strengthen partnerships, enhance trade, and work together on regional security issues. By improving ties, India aims to boost its economic growth and play a more active role in the Asia-Pacific region.
Q: What are the key areas of cooperation between India and ASEAN?
- Answer: Key areas include trade and investment, defense and security, technology and innovation, cultural exchanges, and education. Both India and ASEAN countries are working together to boost connectivity and regional stability.
Q: How does stronger India-ASEAN cooperation benefit both sides?
- Answer: For India, it means access to new markets, increased trade, and stronger security ties in the region. For ASEAN, India’s large economy and growing technology sector offer opportunities for economic collaboration and development.
Q: What challenges does India face in rebooting relations with ASEAN?
- Answer: Some challenges include balancing relations with other regional powers like China, differences in trade policies, and ensuring mutual benefits in key agreements. However, with consistent dialogue and cooperation, these issues can be managed effectively.
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