Trade deficit with ASEAN

•  India’s trade deficit with ASEAN has decreased due to imports of essential commodities and there is need for India to seek better market access for its products and services with the 10-nation bloc.

Analysis:

• Overall impact on the FTA on boosting the trade relation between the two partners has been only marginal. Though the overall figures are impressive with total trade surging from $ 43.9 billion in 2009-10 to $ 65 billion in 2015-16 the relative gains does not seem too significant.
• This is because number show that though India’s exports to ASEAN went up significantly in the initial years from $ 18.1 billion in 2009-10 $ 33.1 billion in 2013-14 it swiftly fell back to $ 25.1 billion in 2015-16, a little lower than the exports level achieved after the first year of the free trade treaty. In percentage terms also the numbers show that the share of Indians export to ASEAN went up from 10.1% in 2009-10 to 16.9% by 2012-13 it has subsequently slipped to 9.5% by 2015-16, a level lower than at the start of the FTA.
• In order to address this issue, India must seek better market access for goods where India has an edge over ASEAN nations, like leather goods and pharmaceuticals, to improve the trade balance.
• Cheap import of poor quality processed food products should be looked into. Appropriate quality norms may be fixed for import of such products from ASEAN as well as other regions of the world.
• The government must ensure reciprocity in the reduction of tariffs in products like steel. Efforts should also be there to improve India’s access to services trade in ASEAN, with a focus on increasing the footprint of Indian banks and financial institutions in the region.

By: Vishal