As India’s Prime Minister Narendra Modi steps into Laos along with his ASEAN counterparts in September, it will be no short of a defining moment for the two Asian economic powerhouses. The India-ASEAN engagement has been gaining traction since the ASEAN-India Strategic Partnership in 2012, leading to strengthening of collective capacities and expanding collaborations. Following the calibration of India’s “Look East Policy” of the 1990s to a more dynamic vision of “Act East” Policy in 2014, the two Asian partners are on course to chart a richer and deeper economic integration. Prime Minister Modi’s visit is expected to be the much awaited catalyst for this transformation.
There are two reasons driving this optimism.
First, there is already a lot of excitement among the business community in the ASEAN countries that view India as an epicentre of economic development and a potential business avenue. India’s resilient economy, notwithstanding the global headwinds, continues to maintain a high growth rate at 7.6% in 2015-16. Fast paced economic and tax reforms, including the efforts to implement Goods and Services Tax, increased public investment in infrastructure, opening up of defence, aviation and pharma sectors to foreign direct investment, etc., has been a shot in the arm for the Indian economy. Clearly, India has emerged as the poster boy of global growth.
Second, the ASEAN has clearly gained in importance for India. It is increasingly obvious that the ASEAN is firmly set to be the melting pot of global business and innovative development with a young workforce, rising incomes, improving infrastructure and large foreign investments. Though the ASEAN members are at different stages of development, they have emerged as major global hubs for manufacturing and trade. The Jakarta based Economic Research Institute for ASEAN and East Asia estimates that the combined GDP of ASEAN could more than double to US$4.5 trillion by 2030.
The shaping up of the ASEAN Economic Community (AEC) has provided Indian industry a golden opportunity to access the wider markets of South East Asian region with a middle-income catchment of more than 600 million people. That, along with the ongoing negotiations for a Regional Comprehensive Economic Partnership (RCEP), pave the way for the creation of an India-ASEAN economic community. We are looking at a win-win scenario here.
While these are promising times, the implications of the developments are wider and deeper. To reap the dividends, India and ASEAN need to work together to develop an ambitious agenda for trade and investments. ASEAN is India’s fourth largest trading partner, but trade flow between ASEAN and India has remained modest. In fact, it declined in 2015 to US$58.7 billion. This calls for a review of the ASEAN-India Trade in Goods Agreement. There may be a case to consider further liberalisation of tariffs on products placed in the Sensitive Track and Exclusion List. Products of major interests are still excluded from tariff concessions. India and ASEAN would also have to work towards minimising major tariff and non-tariff barriers, and liaison with EXIM Bank and other such funding agencies to boost trade, investment. In fact, India-ASEAN Trade Fairs on sector specific basis would be a good idea.
Indian industry believes that there is an infinite potential of India and ASEAN to attract more bilateral investments in manufacturing. The ASEAN member states have expressed interest in the Make-in-India initiative and in Indian government’s broader plan to ensure manufacturing of world class products. This is the right time for ASEAN businesses to jump on the bandwagon with India assuring easing of business regulations and processes.
Another game changer could be in the area of innovation. There are tremendous prospects of cooperation between the governments and the industry in identifying impactful technologies from India and ASEAN for appropriate markets. As a part of industry’s endeavour to tap this opportunity, FICCI, along with the Department of Science and Technology and the Ministry of External Affairs of Government of India, has developed a programme to train innovators by mentoring them on product commercialisation, market readiness, business models, competitive positioning and revenue mechanisms. This initiative could lead to commercialisation of at least 20 technologies every year between India and ASEAN and in the process generating skills and entrepreneurial efficiencies.
Infrastructure is also a very important sector for ASEAN region. India would like to see a greater interest among ASEAN states in its Smart Cities Mission. The focus areas could be in urban development, green technologies, real estate, healthcare and transport systems. Similarly, Indian companies could look at investing in infrastructure projects in Indonesia where economic corridors are being built to become locally integrated and internationally connected.
Another area of common interest is skill development, wherein both partners can look at sharing experiences in establishing centres of excellence for various trades through joint investments. This will help Small and Medium Enterprises. India and ASEAN could also promote SMEs and start-ups by relaxing minimum limit for opening accounts at foreign banks.
I believe a community can only be based on shared networks of connectivity. With India and ASEAN looking to be partners in the AEC, it will be fair to expect that the crucial India-Thailand-Myanmar trilateral highway linking India with Southeast Asia by land is put on fast-track. Meanwhile, ASEAN and India should go ahead and facilitate air connectivity through a regional aviation agreement to strengthen mobility and tourism.
India and ASEAN share a glorious past and cultural heritage. Let us now lay the foundation of an Asian century.