India and the 10-member ASEAN have agreed to review their free trade agreement, signed in 2009, to make it more business-friendly and boost economic ties. The two sides also decided to constitute a joint committee for this purpose.

This was agreed upon during the meeting between economic ministers of ASEAN and Commerce Minister Piyush Goyal in Bangkok on September 10. They met for the 16th AEM-India consultations.

“The ministers agreed to initiate the review of the ASEAN-India trade in goods agreement to make it more user-friendly, simple, and trade facilitative for businesses,” said a joint media statement issued after the meeting.

Background

The 10 ASEAN members are Brunei, Cambodia, Indonesia, Malaysia, Myanmar, Singapore, Thailand, the Philippines, Laos and Vietnam.

At the 2nd ASEAN-India Summit in 2003, the leaders signed the ASEAN-India Framework Agreement on Comprehensive Economic Cooperation.

The Framework Agreement laid a sound basis for the establishment of an ASEAN-India Free Trade Area (AIFTA), which includes FTA in goods, services and investment.

The India-ASEAN trade in goods pact came into force from January 2010.

Under the pact, the two trading partners set timelines for eliminating duties on the maximum number of goods traded between the two regions.

A recent NITI Aayog study said India’s trade deficit with the ASEAN countries doubled to $10 billion in 2017 from $5 billion in 2011.

One reason for the growing deficit may be the low utilisation of the FTA route by Indian exporters to ASEAN countries.

A review of the AIFTA could help improve utilisation in India by making the pact simpler and more user-friendly.

Both sides welcomed the recommendations of the ASEAN-India business council to further promote the potential of bilateral trade through the utilisation of the free trade pact as well as cooperation in some areas like financial technology, connectivity, startups and innovation.

The two-way merchandise trade between ASEAN and India grew by 9.8 per cent from $73.6 billion in 2017 to $80.8 billion in 2018.

India is ASEAN’s sixth largest trading partner and sixth largest source of FDI among ASEAN Dialogue Partners. FDI inflows into India from ASEAN in 2018 was $16.41 billion, approximately 36.98 per cent of total FDI flow into India.