India reviewing ASEAN trade pact with an eye to boost domestic manufacturing

News Excerpt: 

India has begun looking at several products where taxes on input items are higher compared to the finished goods as part of a comprehensive review of its trade pact with the 10-member ASEAN to correct several anomalies that have undermined domestic manufacturing.

About India’s concern with India-ASEAN FTA:

  • India is concerned about the potential abuse of the ASEAN FTA to funnel goods from third countries, especially China, into India, bypassing the expected benefits of the free trade agreement.
    • It is suspected that some ASEAN countries such as Singapore and Vietnam have allowed  re-routing of goods from non-ASEAN countries, leading to increased imports into India.
  • The current ASEAN-India FTA has resulted in a growing trade deficit for India, as imports from ASEAN countries have grown faster than India's exports to these countries.
    • Imports increased sharply from 68 billion USD to 87.57 billion USD, leading to a trade deficit of 43.57 billion USD, up from 25.76 billion USD the previous year.  
    • With a significant increase from a deficit of USD 5 billion  in 2011.
    • India wants to introduce product-specific rules of origin to provide more flexibility in determining the origin of a certain product.
      • Especially for sectors such as gems and jewelry where the current ratio is 35% Value-added requirements are a challenge.
  • The commerce and industry ministry has asked the industry for inputs to identify products where an inverted duty structure is causing a disadvantage to local manufacturers.
    • Certain ferro alloys, aluminium, copper pipes and tubes, textile staple fibres and some chemical preparations are the products where Indian industry faces a disadvantage due to inverted duty structure.

Key points related to the India-ASEAN FTA review:

  • Considering the ASEAN-India FTA is not just a trade negotiation but also a strategic move to strengthen India's economic relationship with Southeast Asia, which is very important for India's Act East policy
  • By modernizing the FTA, India aims to correct trade imbalances and strengthen its position as a central player in the regional economic architecture, increasing its influence and connectivity in the Asia-Pacific region.
  • The Indian negotiating team is ready to put forward a series of demands to promote exports and address the disproportionate advantages enjoyed by ASEAN countries.
  • A key strategy is to integrate product-specific rules (PSRs) into the existing rules of origin (ROO) framework to provide more flexibility for certain products and prevent redirecting goods through countries of origin in ASEAN such as China.
  • India addresses non-tariff measures (NTMs) that hinder market access, such as specific food certification requirements, while approaching new areas such as labor, environment, small and medium enterprises and gender issues in this round of negotiations.
  • India is seeking to reduce tariffs on many exports to ASEAN countries to improve its competitiveness, but it faces the challenge of balancing its interests with protectionist domestic industries.
  • India faces the challenge of high average tariffs (currently  18%), which puts Indian products at a disadvantage  in its own market compared to ASEAN imports.
    • Highlighting the need for careful negotiations to protect India's interests and ensure more balanced trade relations with ASEAN countries.


  • The Association of Southeast Asian Nations (ASEAN) is a regional grouping that aims to promote economic and security cooperation among its ten members: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. 
  • ASEAN countries have a total population of 662 million people and a combined gross domestic product (GDP) of $3.2 trillion as of 2022.  
  • The group has played a central role in Asian economic integration, joining negotiations to form the world’s largest free trade agreement and signing six free trade deals with other economies in the region.


Book A Free Counseling Session