India’s Foreign Trade Assignment

Topic: India’s Relationship with ASEAN countries

Batch: 2021-24

Submitted To: Asst Prof- DR. Ishita Dutt

Submitted By:

Sr.no Name PRN Roll no.

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Index

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Executive Summary

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 Introduction
In an era defined by interdependence and global connectivity, international partnerships play
a pivotal role in fostering economic growth and regional stability. Among the many dynamic
alliances that have emerged, the India ASEAN Comprehensive Economic Cooperation
Agreement (CECA) stands as a beacon of cooperation and mutual prosperity between India
and the Association of Southeast Asian Nations (ASEAN). Established with the aim of
enhancing trade, investment, and economic ties, this landmark agreement has set the stage
for a transformative collaboration that transcends borders and unlocks boundless potential.

The origins of India's engagement with ASEAN can be traced back to a shared history of
cultural, maritime, and commercial exchanges that have flourished over centuries. However,
it was in 1992 when formal diplomatic relations between India and ASEAN were established,
laying the groundwork for a multifaceted relationship that would soon blossom into a strategic
partnership. As both India and ASEAN emerged as vibrant engines of economic growth in the
early 21st century, the need for a comprehensive framework to capitalize on their
complementarities became evident.

In August 2009, the India ASEAN CECA came into effect, ushering in a new era of economic
collaboration and connectivity. This landmark agreement represents a bold commitment by
both parties to forge deeper economic ties, reduce trade barriers, and promote inclusive
growth across the region. Over the years, the CECA has facilitated a significant increase in
bilateral trade and investment flows, empowering businesses, and creating employment
opportunities on a substantial scale.

The comprehensive nature of the agreement touches upon various aspects of economic
engagement, ranging from trade in goods and services to investment promotion, intellectual
property rights, and cooperation in various sectors. By streamlining customs procedures,
eliminating tariffs on a vast array of products, and harmonizing standards and regulations, the
CECA has significantly enhanced the ease of doing business between India and ASEAN
member nations.

Furthermore, the India ASEAN CECA goes beyond purely economic interests, emphasizing
the importance of sustainable development and inclusivity. It promotes closer collaboration
in areas such as science and technology, agriculture, tourism, and capacity building, fostering
knowledge exchange and human capital development for shared prosperity.

As we move forward, the India ASEAN CECA remains an essential pillar of economic
cooperation, strengthening bonds between the two dynamic regions and unlocking the full
potential of their economies. Despite challenges and uncertainties on the global stage, this
agreement stands as a testament to the enduring commitment of India and ASEAN member
nations to forge ahead together on a path of shared growth, progress, and mutual benefit.
Through innovation, dialogue, and cooperation, the India ASEAN CECA continues to serve as
a powerful instrument in shaping a prosperous and interconnected future for both regions.

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 Background and Context of the India ASEAN Comprehensive Economic
Cooperation Agreement:

The India ASEAN Comprehensive Economic Cooperation Agreement (CECA) emerged as a

milestone in the economic and diplomatic relations between India and the Association of
Southeast Asian Nations (ASEAN). The origins of this agreement can be traced back to the
early 1990s when India initiated its "Look East Policy" as a strategic response to the changing
dynamics of the post-Cold War world and its aspirations to bolster economic engagement
with Southeast Asia.

1.The Look East Policy: The Look East Policy, launched by India in 1991, sought to shift its
focus towards Southeast Asia and beyond, recognizing the region's growing economic
significance and potential for collaboration. This policy was motivated by the desire to
diversify India's trade and investment partners and counterbalance the traditional emphasis
on its western neighbours. ASEAN, with its dynamic economies and strategic location at the
crossroads of major shipping lanes, emerged as a natural partner under this policy.

2.Growing Economic Ties: Over the years, economic ties between India and ASEAN had
steadily strengthened, with trade and investment flows witnessing consistent growth.
Bilateral trade between India and ASEAN member countries surged from just over $2 billion
in 1993 to around $80 billion in 2020, marking a significant expansion of economic
engagement.

2.India's Act East Policy: The Look East Policy evolved into the Act East Policy, which aimed
to deepen India's engagement with ASEAN and other East Asian countries in various sectors,
including trade, investment, defence, and strategic partnerships.

3. The Act East Policy continued to emphasize the importance of Southeast Asia in India's
foreign policy calculus, leading to further efforts to bolster economic cooperation.

4. ASEAN's Economic Integration: For ASEAN, bolstering relations with India was part of its
broader strategy to enhance economic integration in the region and expand its economic
partnerships globally. By strengthening ties with India, ASEAN aimed.

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 Historical Background

Historical records of commerce, cultural contact, and migration between the Indian
subcontinent and the Southeast Asian area show that India and Southeast Asia have had
relations since antiquity. Southeast Asia was visited by Indian traders and Buddhist monks,
who helped Indian culture, religion, and ideals grow there.

India and the nations of Southeast Asia were influenced by European powers throughout the
colonial era. Particularly the British established colonial rule over parts of Southeast Asia and
India. During this time, commerce and cultural contacts brought the areas together.

India's Independence: Following its 1947 liberation from British domination, India mostly
concentrated on internal affairs and took a passive role in regional diplomacy in Southeast
Asia.

Early in the 1990s, India implemented the "Look East" strategy in an effort to forge closer
links with Southeast Asian nations and advance the region's economic, political, and strategic
cooperation.

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 Relevance
Economic Significance: ASEAN (Association of Southeast Asian Nations) is a crucial
economic bloc comprising ten countries, including Indonesia, Malaysia, Singapore, Thailand,
Vietnam, and others. These countries collectively represent a substantial market and are
major trade partners for India. Understanding the dynamics of India's economic engagement
with ASEAN is essential to grasp the opportunities and challenges in this economically
vibrant region.

Trade and Investment Opportunities: The ASEAN-India Free Trade Area (AIFTA) agreement,
which came into effect in 2010, has led to significant growth in bilateral trade. ASEAN is
India's fourth-largest trading partner, and India is the seventh-largest trading partner for
ASEAN. Knowledge of the trade and investment patterns between India and ASEAN nations
can help identify potential areas for further collaboration and growth.

Geopolitical Importance: Southeast Asia is strategically located and plays a vital role in the
broader Indo-Pacific region. India has been actively engaging with ASEAN countries to
strengthen its presence in the region, with the aim of countering China's growing influence.
This makes India-ASEAN relations an essential element in the evolving geopolitics of the
Indo-Pacific.

Regional Connectivity: India's "Act East" policy, which emphasizes increased engagement
with Southeast Asian nations, aims to enhance regional connectivity through infrastructure
projects, cultural exchanges, and people-to-people ties. Understanding the progress and
impact of these initiatives is crucial to gauge the effectiveness of India's efforts to integrate
with ASEAN.

Security Cooperation: India and ASEAN countries share concerns about maritime security,
counter-terrorism, and regional stability. Studying the evolving security cooperation between
India and ASEAN helps identify areas of mutual interest and the prospects for collaborative
efforts in addressing common security challenges.

Multilateral Engagements: ASEAN provides a platform for India to participate in various

multilateral forums and regional organizations, such as the East Asia Summit (EAS) and the
ASEAN Regional Forum (ARF). These platforms enable India to engage with major powers
and discuss regional and global issues, impacting the broader international relations context.

Cultural and Historical Ties: India and Southeast Asian nations have historical and cultural
linkages dating back centuries. Understanding these shared ties can foster deeper cultural
understanding and diplomatic relations.

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 Diplomatic Outreach: India's engagement with ASEAN countries forms an essential part of
its broader foreign policy approach. By studying this relationship, one can gain insights into
India's diplomatic strategies and approaches towards its neighbors and the wider world.

Purpose of the Research Report:

This report/index aims to analyse the India ASEAN CECA's background, provisions, and
impact on trade, investment, and economic ties between India and ASEAN member nations.
It provides valuable insights for policymakers, businesses, and stakeholders to understand
the agreement's significance and potential for future collaboration.

Objective of the Study:

1. To study about the Indian ASEAN Comprehensive Economic Cooperation Agreement

2. To assess the relationship between India and ASEAN countries

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 Literature Review

The India-ASEAN Comprehensive Economic Cooperation Agreement (CECA) has been

pivotal in shaping economic relations between India and the ASEAN countries. Numerous
research papers have shed light on the significance and impact of this agreement.

Khurana & Nauriyal explore the trade creation and diversion effects of the AIFTA, assessing
whether it has fostered new trade flows among member countries or diverted trade from non-
member countries to AIFTA members. Pal & Dasgupta evaluate the AIFTA from an overall
perspective, assessing its economic impact, changes in trade volumes, investment flows, and
welfare effects for both ASEAN and India. Tham & Kam reevaluate the agreement's impact,
offering insights into its effectiveness in promoting regional integration and influencing
supply chain dynamics.

Asher, Sen & Srivastava present a sector-specific analysis highlighting the agreement's
significance in specific industries such as manufacturing, services, agriculture, and
information technology. Regional initiatives like India's "Act East" policy and the ASEAN
Economic Community (AEC) establishment have further reinforced such integration.

According to many study articles, the economic ties between India and the ASEAN nations
have continuously evolved. Sen, Asher, and Rajan offer insightful explanations of the
historical setting, intercultural links, and commercial relationships that shaped the current
state of cooperation. India and Southeast Asian countries have a strong sense of connectivity
thanks to their historical ties, which include prehistoric marine trade routes.

The research article by Loitongbam Bishwanjit Singh assesses the impact of the India-
ASEAN Free Trade Agreement (FTA) from trade creation and trade diversion effects.
Existing literature highlights the significance of FTAs in promoting economic integration
between India and ASEAN. Singh's study contributes to this body of knowledge by
presenting a comprehensive analysis of the FTA's impact on trade flows, supply chain
dynamics, and regional integration. Addressing non-tariff barriers and regulatory challenges
is crucial to maximizing the FTA's benefits. Overall, Singh's research provides valuable
insights for policymakers and stakeholders to optimize the economic advantages of the India-
ASEAN Free Trade Agreement.

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A significant turning point in developing economic cooperation between the ASEAN and
India has been the establishment of the Comprehensive Economic Cooperation Agreement
(CECA). Pal and Dasgupta underscore this importance by assessing the CECA's overall
impact. By re-evaluating the CECA's effects and providing a new viewpoint on how well it
can foster regional integration and affect supply chain dynamics, Tham and Kam add to the
literature. The analysis emphasises the importance of the CECA in improving intraregional
commerce and altering supply chains. Asher, Sen, and Srivastava also discussed the rising
economic potential between India and ASEAN. The study pinpoints areas where
collaboration might be strengthened, highlighting the significance of sector-specific research
in essential sectors like manufacturing, services, agriculture, and information technology.

The literature analysis concludes by showing how the economic ties between India and the
ASEAN nations have changed dramatically over time. Establishing the ASEAN-India
Comprehensive Economic Cooperation Agreement has been a transformative milestone,
fostering trade, investment, and regional economic integration. Historical ties and cultural
connections have also played a vital role in shaping the current status of cooperation. As both
regions continue exploring emerging economic opportunities, policymakers and stakeholders
can use these insights to strengthen further and deepen the economic partnership between
India and the ASEAN countries.

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Indian ASEAN Comprehensive Economic Cooperation Agreement

The India-ASEAN Comprehensive Economic Cooperation Agreement (CECA) was a

significant trade agreement between India and the Association of Southeast Asian Nations
(ASEAN). The agreement aimed to boost economic ties and enhance cooperation between
India and the ten ASEAN member countries, which are Brunei, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
The India-ASEAN CECA was signed on August 13, 2009, and came into effect on January 1,
2010. Its primary objectives were to promote trade in goods and services, facilitate
investment flows, and enhance economic cooperation in various sectors.

Key features of the India-ASEAN CECA included:

1. Trade in Goods: The agreement aimed to reduce and eliminate tariffs on a large
number of products traded between India and ASEAN member countries. The gradual
elimination of tariffs helped in boosting trade and enhancing market access for goods
from both sides.
2. Trade in Services: The agreement aimed to liberalize trade in services, allowing
service providers from India and ASEAN countries to access each other's markets. It
facilitated the movement of professionals and skilled workers across borders to
enhance cooperation in services like information technology, finance, tourism, and
healthcare.
3. Investment Promotion: The CECA aimed to promote and protect investment flows
between India and ASEAN countries. It provided a framework for investors to explore
opportunities and establish businesses in each other's territories, with provisions for
dispute resolution and protection of intellectual property rights.
4. Economic Cooperation: The agreement focused on fostering economic cooperation in
various sectors, including agriculture, manufacturing, infrastructure, science and
technology, and small and medium-sized enterprises (SMEs).
The India-ASEAN CECA was a significant milestone in India's efforts to deepen its
economic engagement with Southeast Asia. It aimed to tap into the enormous potential of the
ASEAN market and strengthen India's economic presence in the region.
However, it's important to note that trade agreements and policies are subject to changes over
time due to evolving geopolitical and economic dynamics.

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