By Akhil Bansal
India-ASEAN relations have undergone a tectonic shift in the ongoing structural move in the global order. One finds growing resonance and positivity between the two with a foreseeable impact on the regional economy, trade and geopolitical stability. This can be achieved by tapping and complementing each other s vast and growing markets, which will augur well for both.
Opportunity to boost trade linkages: Both India and ASEAN share common growth drivers such as favourable demographics, increasing domestic demand, proliferation of technology, urbanisation, skilled workforce, and most importantly led by governments that are collaborating to ensure trade in the region reaches new heights, with minimal barriers.
There is no denying that the ASEAN India Free Trade Agreement (AIFTA), which was signed between ASEAN and India in 2015, has led to a progressive market access, and a more conducive investment ecosystem among the member nations. Both India and ASEAN have set-up joint committees to monitor implementation of trade agreements and identify non-tariff measures which can be further liberalised.
Apart from this, India and ASEAN countries have mutually decided to gradually abolish tariffs on 80% of tariff lines accounting for 75% of trade. Further liberalisation in non-tariff measures would be important for India and ASEAN to realise the goal of $200 billion trade by 2022. AIFTA and abolishing of tariffs on a vast number of product lines is expected to give great boost to bilateral trade.
There is no denying that AIFTA will facilitate better integration of supply chains in the machinery, electrical and electronics sectors and transport, which could be further enhanced by services trade and investment. However, it will be imperative to accelerate business to business connections, information flow, establish institutions for mutual recognition of standards in the bilateral services agreements and abolish other non-tariff barriers to realise full trade potential and product integration between India and member ASEAN countries. This optimism is reflected in the significantly higher levels of trade flows between India and ASEAN with ASEAN being India s fourth-largest trading partner.
Enhancing air connectivity along with maritime and road linkages can further create opportunities for employment and growth for India and ASEAN. Further, it will be beneficial to establish efficient regional value chains (RVCs) which will strengthen economic cooperation by expanding market access among ASEAN member countries. Well integrated regional value chains will lead to reduced cost of manufacturing and trading for the member countries.
Mutually-beneficial engagement: Encouraging greater connections and collaboration between India and ASEAN in the areas of infrastructure, innovation and start-ups and digital economy would be mutually beneficial. This would create a multitude of touch points between the two and can potentially take this inherently vibrant relationship to the next level.
Logistics is likely to play a prominent role in the growth of trade between India and ASEAN in the coming years. As a result, the focus of governments and businesses have shifted towards integrating logistics after the implementation of various forward looking initiatives, like the ASEAN-India Commemorative Summit, ASEAN-India Plan of Action (2016-2020), Master Plan on ASEAN Connectivity (MPAC) 2025.
Regional Value Chains (RVCs) have played an important role in laying the foundation for improving manufacturing and production processes in ASEAN countries as they seek to become an integral part of Global Value Chains (GVCs). Mature RCVs in India and ASEAN such as IT/ITeS and apparel sector, respectively, which have now become part of GVCs, can potentially benefit both India and the ASEAN.
Building efficient institutional connectivity: It will be mutually beneficial to develop efficient transportation and infrastructure to enhance economic exchanges between India and ASEAN countries. Establishing trade facilitation measures will help to reduce the volume of documentation which obstructs the movement of goods and services between India and ASEAN. This requires abolishing non-tariff barriers and other restrictive institutional processes.
Growth in innovative ways: India and ASEAN have identified innovation as a priority, and are working towards understanding how to build connectivity so start-ups have access to markets in both regions. Technology plays a very important role in integrating logistics which further gets enhanced by the adoption of technology solutions such as e-commerce and app-based crowd sourced logistics platforms, leading the supply chain activities from insourcing to outsourcing, rail and freight transportation. Companies are now deploying new age technologies like big data analytics, machine learning, blockchain and robotics to develop a much more efficient and smart logistics, reducing time and costs.
The way forward: Greater political, economic and diplomatic engagements between India and ASEAN will pave the way for better trade ties with member ASEAN countries and also prepare them for global uncertainties.
While India and ASEAN together transcend on their respective and joined paths to economic and social prosperity, leveraging institutional mechanisms for an appropriate reduction of non-tariff barriers to enhance trade and investment would be the drum beat for this strategic partnership.