AMITY INTERNATIONAL BUSINESS SCHOOL

Growth Prospects of Thrust Areas of Indian Exports

(GPTAIE) “Significance of LAC & ASEAN in the growth of India’s

export and steps taken by government to form these

markets”

Submitted to: Ms. Kshamta Chauhan

Submitted by: Harshita Baranwal, Section A, Enrollment No. A1802011082

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Over the years economic cooperation between ASEAN and Latin America continue to grow at

unprecedented level, with trade agreements and bilateral investment surging in the past decade.

ASEAN and Latin America are two rapidly growing regions expected to create more mutual

benefit for both region. The population of these two regions is relatively in the same level; about

580 million of the population, and with projected regional growth around 4 - 5%.

In response to the ongoing economic crisis, the dynamism of trade and investment has

transformed to emerging economies like Latin America and Southeast Asia. Latin America has

natural resource endowments together with well-run companies, while Southeast Asia continues

to develop economies and infrastructure investments and opens the window of opportunity to

foreign markets. ECLAC data continues to outline the large opportunity for FDI interaction

between the two regions while APEC provided opportunity and information exchange.

Besides to European Union and United States and with the continuous growth rate, ASEAN is

one of the potential economic partners of Latin American nations. The value of Latin American

imports from ASEAN grew from 0.4% in 1970 to 3.2% in 2008. On the other hand, the value of

Latin American exports to ASEAN increased from 0.2% in 1970 to 1.4% in 2008. This means

that there are trading opportunities between ASEAN and Latin American nations.

While trading between ASEAN and Latin American nations is under progress, both regions push

more efforts to build up more business opportunities for investors. The meeting between ASEAN

and MERCOSUR at ministerial level in Jakarta and positive discussions with Indonesia’s

leadership at the September 2011 ASEAN – Rio Group ministerial meeting this year has elevated

such effort. This means that the trading activities between ASEAN and Latin American nations

will go prosperous in the soon-coming future.

Moreover, there have been several FTAs discussed and studied relating to countries in the both

regions. Thailand and Peru already secured their bilateral agreement of FTA, which allows the

reduction of tariff up to 70%. Similar discussion is on-going with Singapore. Also, the Trans-

Pacific Strategic Economic Partnership (the P-4), a multilateral FTA involving Chile, Brunei,

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New Zealand and Singapore has removed 90% of tariff among signatories and aims to eliminate

all trade tariff by 2015.

The two regions can also increase sharing of knowledge and best practices in the development of

intraregional trade that presents positive features, such as greater manufacturing intensity and a

greater presence of SMEs, the main driver of high quality job creation and social cohesion. Many

of these actions can improve the quality of relationship through export diversification, a stronger

commitment to competitiveness and innovation and a greater effort of regional cooperation in

infrastructure, logistics, intraregional trade, regulatory convergence and policy are measures that

would allow Latin America and the Caribbean to improve the quality of their participation in the

global economy by closing productivity divides and taking advantage of international trade

opportunities to achieve growth with greater equality.

Overview of LAC & India Relations

The Latin America of today has changed fundamentally and irreversibly. The Governments of

Latin America have opened up their markets and reduced import tariffs. They are privatizing

their state enterprises. They are according priority to the modernization/improvement of existing

infrastructure and creation of new infrastructure for the growth and development of the region.

The Latin American countries have reorganized India’s export capabilities and the advantages of

doing business with India and look forward to countries like India for imports at affordable

prices.

The Latin American region comprises of following 43 South American Central American and

Caribbean countries.

Argentina, Brazil, Chile, Uruguay, Paraguay, Bolivia, Venezuela, Ecuador, Colombia, Costa

Rica, Peru, Guatemala, El Salvador, Nicaragua, Honduras, Belize, Barbados, Jamaica, Guyana,

Antigua, Trinidad & Tobago, Grenada, Dominica, St. Kitts-Nevis-Anguilla, Montserrat, St.

Vincent, St. Lucia, Bermuda, Bahamas, Cayman Islands, British Virgin Islands, Dominican

Republic, Cuba, French Guiana, Falkland Islands, Haiti, Guadeloupe, Netherlands Antilles,

Martinique, Suriname, Panama, Turks and Caicos Island & US Virgin Islands

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India’s exports to the Latin American region are proposed to be enhanced through integrated

efforts of the Government of India, India Trade Promotion Organization, Export Promotion

Councils, Apex Chambers of Commerce & Industry, Indian Missions and Institutions such as

EXIM Bank, ECGC etc. Meetings with CII, FICCI, EPCs and other trade bodies are held with a

view to organizing seminars, securing participation in fairs, holding catalogue shows/BSMs and

sending/inviting delegations. Similarly meetings are held in the sectors of shipping and civil

aviation to initiate measures to improve the transport links. Discussions are held with Exim

Bank, ECGC, etc., for effecting improvements in the financial and banking sectors.

FOCUS LAC PROGRAMME: AN INTEGRATED EFFORT

Objective Of “Focus: LAC” Programme

Considering the potential of the market in the Latin American region an integrated programme

“Focus: LAC” was launched in November 1997 by the Commerce Ministry. The programme has

been reviewed from time to time and extended up to March 2014. This programme aims at:

• Sensitizing the organizations viz. Export Promotion Councils Chambers of Commerce &

Industry, EXIM Bank, ECGC, etc. involved in trade promotion efforts.

• Granting various incentives to Indian exporters and launching of export promotion measures

• Focusing on the Latin American region with added emphasis on major trading partners of the

region.

• Focusing on the following major product groups for enhancing India’s exports to the Latin

American region:

Textiles including ready-made garments carpets and handicrafts

Engineering products and computer software

Chemical products including drugs/pharmaceuticals

Components Of “Focus: LAC” Programme

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The Focus: LAC programme may be broadly categorized as under:

A. Institutional mechanism.

B. Improved market access.

C. Economic infrastructure facilities.

A. Institutional Mechanisms

1. Measures taken by the Government of India

(i) Preferential Trade Agreement (PTA) with MERCOSUR

A Framework Agreement was signed between India and MERCOSUR on June 17 2003 at

Asuncion, Paraguay. The aim of this Framework Agreement is to create conditions and

mechanisms for negotiations in the first stage by granting reciprocal tariff preferences.

As a follow up to the Framework Agreement a Preferential Trade Agreement (PTA) was signed

in New Delhi on January 25, 2004. The aim of this Preferential Trade Agreement is to expand

and strengthen the existing relations between MERCOSUR and India and promote the

expansion of trade by granting reciprocal fixed tariff preferences.

Under this PTA India and MERCOSUR have agreed to give tariff concessions ranging from 10%

to 100% to the other side on 450 and 452 tariff lines respectively.

(ii) Preferential Trade Agreement (PTA) with Chile

A Framework Agreement to Promote Economic Cooperation between India and Chile was

signed on January 20 2005. The Framework Agreement envisaged a Preferential Trade

Agreement (PTA) between the two countries as a first step. As a follow up to the Framework

Agreement India and Chile had signed a Preferential Trade Agreement (PTA) in March 2006.

While India has offered to provide fixed tariff preferences ranging from 10% to 50% on 178

tariff lines at the 8 digit level to Chile. Likewise Chile has offered us tariff preferences from 10%

to 100% on 296 tariff lines at the 8 digit level.

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(iii) Enhanced Interaction:

Frequent interactions with important trading partners shall act as a catalyst for the private sector

to explore and tap the export potential. The Government shall have increased frequency of

interaction at the highest level with important trading partners. Trade/Economic Missions result

in creating awareness in the region regarding India’s economic reforms strengths of the Indian

industry and its export capabilities. They also provide an impetus for businessmen to explore

new markets. High-level trade missions are being mounted to the LAC region under the

programme.

(iv) Joint Commissions/Committees

The following Joint Commissions/Committees exist with countries of the Latin American

region:

(a) Indo-Argentine Joint Commission

(b) Indo-Argentine Joint Trade Committee

(c) Indo-Mexican Joint Commission

(d) Indo-Brazilian Commercial Council

(e) Indo-Cuban Joint Commission

(f) Indo-Cuban Trade Revival Committee

(g) Indo-Suriname Joint Commission

(h) Indo-Guyana Joint Commission

(i) Indo-Venezuela Joint Commission

(j) Indo- Trinidad Joint Commission

(k) India- Brazil Trade Monitoring Mechanism (TMM)

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In order to have increased frequency of interaction with important trading partners in the LAC

region the meetings of the Joint Commissions have to be held on a regular basis. Further efforts

would be made to set up consultative machineries with the other major countries in the region

with a view to enhancing two-way trade.

(v) Commercial Attaché

At present, India Missions are functioning in 14 major countries in the LAC region. Recently,

full-fledged commerce posts have been sanctioned by this Department for the Indian Embassy at

Brasilia, Buenos Aires (Argentina), Santiago (Chile), Bogota (Colombia) and Mexico City

(Mexico) in different capacities. These posts are in addition to the existing 10 posts of

Marketing Assistant operating in nine Indian Missions in the LAC region ( EOI Argentina has

two sanctioned posts of such Marketing Asstt). Efforts are being made to further strengthen these

Missions for commerce and trade.

(vi) Measures by ITPO:

A cell in the ITPO has been created to act as a center for Trade Development with the Latin

American region. The role of the cell in the ITPO is (a) to deal exclusively with export

promotion and development matters pertaining to the LAC region (b) Organizing

fairs/exhibitions as a tool of market development & (c) Organizing Buyer-Seller Meets (BSMs).

B. IMPROVED MARKET ACCESS

1. Foreign Trade Policy initiatives:

DOUBLE WEIGHT: For the purpose of recognition as Export House (EH), Star Export

House (SEH), Trading House (TH), Star Trading House (STH) and Premier Trading

House (PTH) double weight is given to exports being made to Latin American countries.

FOCUS MARKET SCHEME (FMS):

To offset high freight cost and other externalities to select international markets with a

view to enhance our export exporters of all products through EDI enabled ports to

notified countries ) shall be entitled for Duty Credit scrip equivalent to 3.0% of FOB

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value of exports for each licensing year. Special FMS was introduced in Oct, 2011 by this

Dept, with a view to increase the competitiveness of Indian exports, which allows the

total duty credit scrip @4%. under this Special FMS , twelve (12) countries of LAC are

included. Cuba and Mexico are new entrants in this category, whereas remaining 10

countries are already included in FMS.

2. Market Development Assistance (MDA):

The MDA guidelines have been revised from 1st April 2006 and the following provisions have

been made in respect of Focus LAC:

(a) Grant to Individual Exporters

(b) Participation in Fairs/Exhibitions in LAC region by EPCs

(c) BSMs/Trade Delegations to LAC sponsored by EPCs

(d) Reverse Trade visits of prominent foreign buyers/delegates/journalists to India for

participation in BSMs/Exhibitions etc

(e) Translation Facilities in foreign languages and vice versa

(f) Product Catalogues in CD Rom

3. Market Access Initiative (MAI) Scheme

Market Access Initiatives (MAI) Scheme is envisaged to act as a catalyst to promote India’s

export on a sustained basis. The scheme is formulated on focus product-focus country approach

to evolve specific market and specific product through market studies/survey. Assistance would

be provided to Export Promotion Organizations/ Trade Promotion Organizations/ National Level

Institutions/ Research Institutions/ Universities/ Laboratories Exporters etc. for enhancement of

export through accessing new markets or through increasing the share in the existing markets.

Under the Scheme the level of assistance for each eligible activity has been fixed.

4. Information support:

NCTI shall provide:

- Information support in co-ordination with UNCTAD Trade Points.

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- Product Catalogues

- Trade Data

C. Economic infrastructure facilities.

1. ECGC Cover: The Export Credit Guarantee Corporation of India (ECGC) undertakes

periodically a comprehensive review of the grading of the countries based on the methodology of

risk scoring.

2. Lines of Credit: EXIM Bank extends Lines of Credit (LOCs) to overseas financial institutions

regional development banks sovereign governments and other entities overseas to enable buyers

in those countries to import goods and services from India on deferred credit terms.

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Top items of India’s imports from LAC countries (2010-11)

Extreme Focus Product Groups

Three product groups viz. textiles, engineering products and chemical products constitute nearly

half of India’s exports to the region. In the textiles sector ready-made garments made-ups fabrics

yarn carpets handicrafts etc. are fast moving export items. In the engineering sector, automobiles,

auto components, electrical appliances, machinery, computer software, etc. have good scope for

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exports. Bulk drugs, pharmaceuticals, dyes and 14 intermediates agrochemicals, plastic products,

naphtha, resins, essential oils, molasses, tyres for buses, trucks & cycles are also important items

in the chemical products sector.

The Programme aims to focus on the following major product groups for enhancing India’s

exports to the Latin American region:

(i) Textiles including ready-made garments carpets & handicrafts;

(ii) Engineering products including computer software;

(iii) Chemical products including drugs/pharmaceuticals.

Based on the feedback from the Indian Missions in the LAC region and the trends in exports

during the last few years a list of specific products for promoting exports to the identified

countries has been prepared. The National Centre for Trade Information (NCTI) has carried out

a detailed study/trade analysis of the select countries and the specific focus products identified

for each country

ROLE OF ITPO/EPCs/APEX CHAMBERS/MISSIONS IN FOCUS LAC PROGRAMME

The success of the “FOCUS: LAC” Programme would require a proactive role and involvement

of Apex Chambers and Export Promotion Councils. Their role would include:

Role of ITPO

o Participation in specialized and commodity specific fairs & exhibitions in the countries of the

LAC region.

o Special promotion and publicity in the Latin American countries.

o Promotion of Indian consumer products in Departmental Stores in LAC

o Organizing Buyer Seller Meets.

o Promotion by Indian Missions by organizing catalogue/brochure exhibitions.

o Awards to leading exporters to the Latin American region.

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Export Promotion Councils

o To carry out market surveys for the items with export potential in the Latin American countries

and disseminate information to their members through their publications.

o To encourage members to participate in specialized International Fairs.

o To bring out promotional literature in Spanish/Portuguese.

o To hold commodity specific seminars in selected industrial centers.

o To prepare compendia of main importers/associations in the Latin American countries and

disseminate this information to their members.

o The Councils will have separate Chapters on LAC on their websites and will add separate

sections in their newsletters.

o The Department of Commerce will sponsor one or two officials from each Council for courses

in Spanish/Portuguese at Indian Institute of Foreign Trade.

o Every Buyer Seller Meet (BSM) in India/LAC will be followed by a press conference by the

Council/Missions in the respective countries for projecting the capabilities of Indian Exporters.

o A “Made in India” show should be preceded by BSMs and catalogue shows in the countries

adjoining the country where such an exhibition is being organized.

o The services of the ITPO office at Sao Paulo will be utilized for trade information in LAC.

o Each EPC may fix an indicative export target for the LAC region.

o The LAC region is to be explored as a centre for investments for export promotion.

o EPCs may source trade analysis from NCTI.

Apex Chambers Of Commerce/Industry

o To establish and strengthen ties with their counterparts in the LAC region and ensure that there

is a frequent exchange of delegations.

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o To widely disseminate information among Indian businessmen through their publications

bulletins and other periodicals regarding the potential of Indian exports to Latin America.

o To organize seminars and workshops at regular intervals to create awareness regarding the

untapped potential that exists in the region for exporting goods. These seminars/workshops shall

be held in industrial centres for wider coverage.

Indian Missions in Latin American Countries

o To organize catalogue/brochure exhibitions.

o To provide regular feedback on the implementation of the Programme.

o To play a proactive role in coordinating promotional measures like organization of Buyer-

Seller-Meets visit of delegations and participation in trade fairs.

o To carry out market surveys for the specified products in collaboration with the ITPO and

concerned EPCs.

o To send processed/usable information in bulletins to the EPCs of Focus Products.

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ASEAN & India Relations

India has shared a close relationship with ASEAN countries since the time of its independence. It

started expanding its influence in the Southeast Asian region during the 1950s by supporting the

Indonesian struggle for independence and involving itself in the Indochina crisis in the 1960s. It

also signed friendship treaties with Indonesia, Myanmar and the Philippines and consolidated its

bilateral and diplomatic relations with them. However, with the signing of an “India- Soviet

Peace and Friendship Cooperation

Treaty”, relations between India and ASEAN took a downturn. The ASEAN members’

perception of the Soviet Union was far from benign and the signing of the treaty made them

suspicious of India’s intentions.1 Further, under the influence of the Soviet Union, India

recognized the People’s Republic of Kampuchea regime that was propped up in Vietnam in July

1980 and through the decade, built strong political and military relations with Vietnam. This was

contrary to the ASEAN view which condemned the Kampuchean regime and resulted in the

worsening of relations between India and ASEAN. Through the 1980s, relations between India

and ASEAN were uncertain and plagued by various political and diplomatic differences which

resulted in a compromise of economic relations between them. However, with the collapse of the

Soviet Union, India embarked on re-orienting its foreign policy priorities. India initiated its

Look-East policy and began reviving its economic relations with Southeast Asia.3 ASEAN too

realized the importance of India as the third-largest economy in Asia and an emerging regional

power and saw its significance for ASEAN’s political and economic future. The growing

complementarity of views led to the acceptance of India as ASEAN’s sectoral

partner in early 1992 and its full dialogue partner in July 1996.4

The 1990s saw the rise of regionalism in Southeast Asia. In the aftermath of the economic crisis

of the late 1990s, there has been a heightened emphasis on regional

economic integration with the consequent proliferation of various Free Trade Agreements

(FTAs) involving ASEAN and other countries in the region. With rising economic growth and its

emergence as an influential player in the region, India too has adopted a similar policy of

establishing closer economic and strategic engagements with ASEAN. At the second ASEAN-

India Summit in Bali in October 2003, India and ASEAN signed an agreement to establish a Free

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Trade Area. The presence of India at the East Asia Summit in December 2005 and its inclusion

in the East Asia Community have further testified to the growing synergies between them and

suggest a future entailing greater integration in the region. The objective of this paper is to

highlight the trends in the interactions between India and ASEAN and elaborate the relations

between them. While their motivations for developing stronger ties are largely economic in

nature, they rest to a large extent on definite geopolitical considerations. The paper examines

these factors and attempts to provide an understanding of the direction in which their relations

are heading, along with an analysis of the dynamics affecting it.

INDIA’S ATTENTION ON REGIONALISM

India’s new growth story is the direct result of the conscious change in its economic

policy after its macroeconomic crisis in 1991. There was a realization of the need to change the

inward-looking growth model that had been followed by India since the time of its

independence, due to its inappropriateness in the post-Cold War era and an age of globalization.

India, thus, initiated reforms to restructure, Since the reforms, India has assumed an outward

economic orientation and has worked to improve its economic relations with other countries. In

keeping with its reformed approach and the rise in bilateral and regional trading agreements

around the world, India too, embarked on establishing trade and investment linkages with a

number of countries in Asia. The motivations for these deals have been economic as well

strategic in nature. “India envisages PTAs as important foreign policy tools to forge new

strategic alliances with the rest of Asia, and to contribute to regional security efforts.”15 It has

established trade agreements within SAARC, ASEAN and with individual countries in East Asia.

It has developed partnerships with Latin American and Middle Eastern countries with its

agreements with the Mercosur grouping, Egypt and Chile.16 Its measures towards trade

integration are not restricted to merchandise trade alone, but also include commercial services

and financial integration which will contribute to the strengthening of India’s market-based

economic integration, in addition to improving its competitiveness and economic robustness.17

With the deadlock at the Doha round, Indian policy makers have clearly indicated that

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bilateralism will be a key instrument of India’s commercial trade strategy in the future.18

China’s dominance in Southeast Asia became a great cause of concern for India. China has

provided military support to all of India’s neighbours and significant assistance to Pakistan for its

nuclear program. This has been a serious destabilizing factor for India. Further, China’s rising

presence in Southeast Asia has posed serious security concerns for India. A country in control of

the Indo-China region would threaten India’s security, as many Southeast Asian states have

adjoining borders with India.19 As a consequence, India has attempted to improve its interaction

with Southeast Asia by rebuilding its long lost ties with ASEAN. This was largely due to the

drastic increase in bilateral merchandise trade between India and China, which rose from US$1.7

billion in 1997-98 (US$0.7 billion in exports and US$1 billion in imports) to about US$7 billion

in 2003-04 (US$3.0 billion in exports and US$4.0 billion in imports). The bilateral trade between

India and Japan however, has shown a decline.

Apart from merchandise trade, there has also been growing trade in commercial

services. The services sector has been rapidly expanding in India with its growth in IT and

Business Process Outsourcing services along with its rise in other East Asian economies. There

has consequently been enhanced integration in their trade, especially due to improvement in

technologies and increasing globalization.20 The combination of a large supply of topnotch, low-

cost labor, high-quality software processes, and the scale to handle all types of work, has allowed

the Indian software industry to excel in the world market

According to the WTO ranking of commercial trade in 2003, India ranked 21st in global exports

and imports of commercial services, accounting for 1.4 per cent of global service exports and 1.2

per cent of global service imports.22 Its success in the services sector has allowed it to push for

reforms through the GATS and extend proposals at the WTO regarding the same, thereby,

increasing hope for the liberalization of commercial services.

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ASEAN’S INTERESTS IN INDIA

With substantial growth in the last decade, India has emerged as one of the largest economies not

just in Asia, but the entire world. With the third largest GDP and a growth rate of 7-8 per cent,

India is poised to emerge as a large economic power in the years to come. With a rising middle

class and an economy on an upward trajectory, India has large economic potential and provides

ample opportunities for economies in the region to link up with its economic resurgence.

ASEAN has certainly taken note of this fact and is aware that it is in its best interest to include

India in a regional framework and thereby, capitalize on its emerging strength. One of the

objectives of the Framework Agreement on Comprehensive Economic Cooperation signed

between ASEAN and India is to “facilitate the more effective economic integration of the new

ASEAN member states and the bridging of development gap among the parties. There is

growing awareness that regional disparities need to be addressed and range of countries that

derive benefits from growth in the region. ASEAN and India also share common

interests with regard to regional peace and security. Since the 11 September 2001

attacks on the United States, terrorism has become a new threat to global and

regional security. Both ASEAN and India are faced with grave vulnerabilities with

regard to terrorism and it is in their common interest to work together to build

peace and security in the region. Further, the collapse of the Soviet Union and the

rise in China’s power in the last decade and a half have drastically altered the

balance of power in Asia. “One of the considerations ASEAN took into account while according

bigger status to India was definitely the issue of China’s rising power profile and especially its

naval incursions into the South China Sea as also China’s expanding acceptance worldwide.

With the withdrawal of US troops from strategic locations in the region following the collapse of

the Soviet Union, the Southeast Asian countries deemed it appropriate to guard against Chinese

influence by setting up vital sea-lanes of communications such as the Taiwan, Malacca, Sunda

and Lombhok Straits. Accordingly, ASEAN countries justifiably perceive India, with the largest

Naval forces in the Indian Ocean and nuclear capabilities, a strategic partner to balance China’s

growing power in the region. Conversely, there have also been apprehensions within ASEAN

regarding India’s Navy and nuclear capabilities as India itself posseses the ability to yield

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substantial influence and power in the region. “But India's willingness to accede to the Treaty of

Amity and Cooperation inSoutheast Asia and its endorsement of the Southeast Asia Nuclear

Weapons Free Zone (SEANWFZ) has gone a long way in assuring the region of India's intent.

The ASEAN looks at India's security needs more as a factor emanating from the compulsions of

the geopolitical position that India holds, rather than being a derivative of any hegemonic

designs on India's part.”

With increasing foreign exchange reserves and a prudently managed financial system,

India is attracting attention for its strong macroeconomic fundamentals. Studies by

Goldman Sachs suggest that “India has the potential to show the fastest growth over the next

thirty and fifty years. With the growing economic integration of the Indian

economy, its growth effects are bound to spill over to other countries as well. With

booming demand for infrastructure and investments, India can counterbalance the loss of the US

market due to its attempts to curb its growing trade deficit. With a rising middle class, domestic

demand in India is bound to increase by leaps and bounds in

the next decade. Since the collapse of the Soviet Union, India has pursued a Look East Policy

and worked towards integrating with East Asia. Complementing the rising trade integration with

broader integration measures will only consolidate the existing links and compound the potential

benefits for all countries involved. In the last decade, India has successfully developed its

software and services sector. Along with East Asian specialization in manufactures, India’s

strength in services could result in a formidable strategic combination. With the realization of

such potential, India is increasingly getting linked with existing East Asian production networks.

This however, is in a latent stage and there is large potential for beneficial synergies transport

links with Southeast Asian economies can act as a link to provide access to markets in East Asia.

While East Asia is on the verge of entering a phase of demographic burden with a lower share of

working age population and a higher median age of workers; India is entering a demographic

boon phase with a higher share of working age population and can prove to be a human resource

base for East Asia. The increasing relevance of India in the East Asian framework has

contributed to its rising interaction with ASEAN. Though there has been turbulence in their

relations in the past, it is evident that the importance of integrating in today’s interconnected

globalizing world has been recognized by countries in East Asia. With ASEAN as the

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established hub and the framework of regionalism in place in the region, it has been realized that

it is prudent to include India and allow it to participate for increased benefits and growth.

INDIA’S FOCUS ON ASEAN

India-ASEAN relations stepped up a notch towards the end of 1990s and the beginning of 2000.

In 1998, the then Indian Prime Minister, Mr. Atal Bihari Vajpayee intended to accelerate India’s

Look East Policy.32 “The concept of ‘extended neighbourhood’ was popularized by Indian

leaders such as I.K. Gujral and Jaswant Singh.”33 In a lecture at the Institute of Strategic Studies

in Singapore in 2000, Jawant Singh explained, “India’s parameters of security concerns clearly

extend beyond confines of the convenient, albeit, questionable geographical definition of South

Asia. South Asia was always a dubious framework for situating the Indian security paradigm.

Given its size, geographical location, trade links and the EEZ, India’s security environment and

therefore potential concerns range from the Persian Gulf to the Straits of Malacca in the West,

South and East, Central Asia in the Northwest, China in the Northeast and South Asia.”34 Thus,

India is looking to develop associations with countries beyond its immediate neighbourhood,

perceiving countries in East and Northeast Asia as its far eastern neighbours and the ASEAN

countries as its near eastern neighbours.35 One of the first concrete steps taken by India was the

setting up of the Mekong- Ganga Cooperation Project in 2000 which includes India and the five

ASEAN countries (including the four newer ASEAN members – Vietnam, Lao, Cambodia,

Myanmar and Thailand). India was aware that economic cooperation with ASEAN would

depend on how fast the new ASEAN countries could catch up with the rest of ASEAN and

intended to provide them with economic and technical assistance.36 The institutionalization of

ASEAN-India relations came with the First ASEAN-India Summit in Pnhom Penh on 5

November 2002 and was perceived as the success of India’s Look East Policy. It was considered

an acknowledgement of India’s emergence as a key player in the Asia Pacific Region.37 This

breakthrough came after a long and arduous effort on the part of the Indian diplomacy to

convince ASEAN countries to hold a separate ASEAN-India summit. This sentiment was echoed

in an article in a leading Indian newspaper which stated that “The first Association of Southeast

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Asian Nations-India Summit held in Phnom Penh, Cambodia, sets the stage for India to move

purposefully ahead in developing a broad strategic partnership Indian political leaders constantly

talk about how they will end poverty, the leaders in East and Southeast Asia speak about how

they will enhance the prosperity of their peoples.

There is a clear recognition in Indian political circles of the economic and strategic importance

of ASEAN to India’s national interest. At the Annual Singapore Lecture in 2002, the then Indian

Prime Minister, Mr. Atal Bihari Vajpayee stated, “[The Southeast Asian] region is one of the

focal points of India’s foreign policy, strategic concerns and economic interests.”39 The strategic

location of the ASEAN region places it among the most crucial regions in the world. With

Myanmar being included in ASEAN, India now shares a land boundary with ASEAN, apart from

sharing maritime frontiers with Indonesia and Thailand and its exclusive economic zone (EEZ)

with Malaysia.40 India considers ASEAN to be the nucleus of the East Asian region and believes

in laying emphasis on its interaction with ASEAN. With deep concern regarding China’s

influence in the region, India is looking towards ASEAN to carry forward a multilateral security

order in the Asia-Pacific.41 At the same time, as explained by Hong, “from the ASEAN and

Japan perspectives, India was seen as a possible counterweight to China in Southeast Asia, India

has publicly avoided being drawn into such a role.”42 India is, in fact, looking to develop a

complementary relationship with China instead of a competitive one. There is a sense that India

must not confront China, but should prepare to face stiff competition from it and possible

conflict in the future.43 The increasing importance of maritime trade and energy security for

India has made it imperative to ensure the safety of Sea Lanes of Communication (SLOC’s) in

Southeast Asia. Maritime piracy has large implications for security in the economic sphere and

in the Malacca Straits, is a common threat to India and the ASEAN region. With India being

dependent on sea ways for over 97 per cent of its global trade, the safety of sea lanes around the

ASEAN region is of vital importance to India. India understands that a prosperous and stable

ASEAN that safeguards vital sea lanes between the Indian and Pacific

Oceans will serve its best interests. “Coordination between India and ASEAN in safeguarding

their shared marine environment and its resources, promoting the safety and security of

navigation in their common ocean areas, and ensuring legitimate, peaceful and sustainable uses

of the oceans, can contribute to both maritime development and maritime security in the region.”

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Complementing the extent of strategic cooperation between India and ASEAN, the scope for

stronger economic relations between them has also been steadily rising. There is tremendous

potential between India and ASEAN in various fields including trade and investment, science

and technology, tourism, human resource and infrastructure development. Such cooperation

contains the scope for greater economic integration between the two and potentially large

economic benefits for the people of all the countries involved. Cooperation in the monetary and

financial sectors facilitates investment, trade integration and contributes to sustained growth in

countries. India needs to attract foreign capital and direct investment from abroad and the

ASEAN countries are a good resource for them. Initiatives towards integration of capital markets

between countries will go a long way in facilitating the same. The limited export-import

financing which proves a hindrance to trade between the countries can be overcome by the

setting up of an association of export and import banks in the region. The development of an

Asian Bond market would also be beneficial to India due to the stability in foreign exchange

prices that it would achieve through it. Therefore, there is tremendous potential for benefits from

financial and monetary integration between India and ASEAN.

There is large scope for cooperation between India and ASEAN in the area of science and

technology. ASEAN has significant hardware and manufacturing capabilities owing to its largely

export oriented economies. India needs to exploit possible synergies between the hardware

capabilities of ASEAN countries and its own software and services capabilities in order to

strengthen the IT foundation of the region and bridge the digital divide.46 Both India and

ASEAN have great potential in the tourism industry. It is an area where India is keen to link up

with ASEAN in order to promote two-way tourist traffic and to leverage its complementarities to

ASEAN tourist circuits in the international tourism markets. Specific destinations in India are

being identified in order to address related infrastructure needs involving both ASEAN and

Indian investors. India is looking towards ASEAN to gain expertise in the development of

tourism infrastructure and other related services.47 Since human resource development has a

significant bearing on economic development, India hopes to undertake various initiatives

including academic exchange programs, India study centers in ASEAN and vise versa and

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arrangements between ASEAN and Indian institutes with specific focus on Southeast Asian

studies. Such measures are going to help build a specialized and vibrant resource base for

all countries involved.

INDIA-ASEAN TRADE

Trade is one of the principal channels of India’s economic integration with ASEAN. With large

potential for India and ASEAN countries to develop trade relations, it is one of the primary areas

of concentration on both sides. This is especially relevant as there is growing consensus that

India’s economic structure, being services oriented, is largely complementary to the

Manufacturing-oriented economies in ASEAN.49 Trade between ASEAN and India has

increased over the past decade, keeping in line with efforts towards economic integration by both

sides. Tables 5 and 6 provide a more up-to-date picture. One can observe the sharp rise in

cumulative exports from India to ASEAN since 2002. This rise is especially large with respect to

Singapore. The rise has also been noticeable between 2005-06 and 2006-07. Overall, with the

exception of a few new members in ASEAN, the volume of exports has increased from 2005-06

to 2006-07. A similar trend can be observed in the case of imports. Most notably, India’s imports

from Malaysia and Singapore have risen more than 5 times between 2002 and 2007. Imports

from Thailand too, have risen favourably, exhibiting a trend of consistent increase with higher

growth rates in successive years. However, Indian policy makers should be aware that India-

ASEAN trade, though increasing, is not substantial enough compared to global figures and needs

to be increased further to realize the potential between the countries. Services trade between

India and ASEAN grew at more than twice the rate of merchandise trade. India’s share in world

trade of commercial services in 2002 was higher than Malaysia, Indonesia, and the Philippines

and almost about as much as Singapore’s trade in commercial services. The Information and

Communication Technology (ICT) services and related services were the major driving force

behind services trade in India. “The growth of this sector has been propelled by the nurturing of a

pool of skilled ICT manpower, combined with an increasing international demand doe such

competitive and skilled manpower.”50 According to Gartner Research, “The [Indian] ICT

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industry is rapidly growing in size and importance to the overall Indian economy. Its impact is

rising in terms of being a larger and more significant component of the overall export market, as

well as in helping improve the local and global competitiveness of Indian companies across

industries.”51 However, India’s share in the global software market is still small.

Its cooperation with ASEAN countries like Singapore and Malaysia could create synergies for

mutual benefit in this area as these countries already have highly developed capabilities in this

field.52 In 2000, the ICT services sector accounted for close to 70 per cent of India’s service

exports which was the second highest share in ICT exports after the Philippines. This share

would only have increased over the years and suggests the strong bearing it has on India’s

exports especially to ASEAN.

INDIA-ASEAN TRADE INTEGRATION: STATUS

The offer by India’s former Prime Minister, Mr. Atal Bihari Vajpayee for a free trade pact

between India and ASEAN at the Phnom Penh ASEAN-India summit marked the beginning of a

new phase in ASEANIndia relations. Following this, at the Second India-ASEAN Summit in

Bali in October 2003, the establishment of an India-ASEAN Free Trade Agreement was put on

the agenda. This was done in the form of a Framework Agreement on Comprehensive Economic

Cooperation between India and ASEAN. According to the agreement, its purpose was to

“minimise barriers and deepen economic linkages between the Parties; lower costs; increase

intra-regional trade and investment; increase economic efficiency; create a larger market with

greater opportunities and larger economies of scale for the businesses of the Parties; and enhance

the attractiveness of the Parties to capital and talent.”53 With the East Asia Summit, India-

ASEAN relations have progressed even further. It is Noteworthy that India is being considered

as an integral part of the East Asian Community. This has been possible due to the consolidated

support from ASEAN and ASEAN+3 countries like Singapore, Indonesia, Thailand and Japan.

Their support for India has largely been due to the recognition of India’s considerable economic

and strategic strengths. Significantly, trade negotiations on the India-ASEAN FTA were finally

concluded on 7 August 2008. According to the Framework Agreement on Economic

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Cooperation signed between the two countries in October 2003, the negotiations were supposed

to have been completed by June 2006 with the FTA itself being implemented by 1 January 2007.

However, the inability to resolve several contentious issues due to fierce protection of domestic

industries attempted by thetwo parties, drastically delayed the conclusion of the agreement.54

Negotiations had stalled due to India’s tariff cut offers on crucial agricultural products which

were considered inadequate by ASEAN members. India refused to roll back tariffs on petroleum,

palm oil, pepper, tea and coffee in order to protect its sensitive domestic sector. Most

significantly, negotiations were on the verge of collapse as Malaysia and Indonesia sought larger

access for their palm oil exports, requiring India to lower import duties from its preferred 45 per

cent to 30 per cent. India attempted a compromise by trimming its negative list from 1,414

products down to 560 before finally settling at 490 products, contrary to ASEAN, which

increased its negative list from the initial 600 to a 1,000 plus products. Nonetheless, ASEAN’s

insistence on obtaining greater concessions on palm oil exports caused excessive delay in

reaching an agreement.55 The FTA, once implemented, will improve India’s trading position in

the region in light of the preferential access extended to China by ASEAN. Preferential tariffs

enjoyed by ASEAN members among themselves too have contributed to the deteriorating

competitiveness of Indian exports to the region. With the FTA in place, India can look forward to

greater market access with better terms of trade and hope to compete successfully with goods

from other countries in the region. Owing to China’s rising competitiveness in global trade and

investment, the FTA will enable India to forge ties with ASEAN to ensure its support as a crucial

ally. It is important for India to consolidate its position in East Asia in light of China’s growing

influence through trade, aid and investment. With countries in the region moving at a fast pace

towards an EastAsian Community, it is important that India substantiate its position in the

grouping to secure its economic and strategic interests in the region. The FTA certainly is a

crucial first step in this direction.56 While the ASEAN-India relations at present are the best they

have been through history, there still remain various aspects which need to be looked into for the

continued success of their relations in the future. To obtain maximum benefits and associated

advantages from the FTA, it is important for India to ensure that it undertakes concomitant

reforms in taxation, infrastructure, and governance. Such measures are important to prevent any

adverse outcomes of such an agreement on the Indian industry and to ensure that the

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opportunities presented by the FTA are utilized to the maximum. It also needs to guard against

the so-called ‘Noodle Bowl Effect’ that is resulting due to East Asian Trade Integration. The

plethora of FTAs within East Asia has given rise to a complex set of non-uniform and

overlapping rules of origin, a situation that presents the risk of fuelling trade disputes. A sincere

attempt towards effective management of the regional integration process should include

dismantling non-tariff barriers, an effort which will ensure a progressive framework which will

work to facilitate trade at the multilateral level.57 India stands to gain tremendously through

greater economic integration with ASEAN, provided cooperation goes beyond free trade of

goods and commodities. Tremendous opportunities exist in areas of media and entertainment,

tourism and technology services. With Indian manpower being technically and professionally

competitive, India possesses a distinct leverage over China’s largely labour and manufacture

oriented human resource. However, its prospects of competing in industrial and manufactured

goods stand greatly diminished in light of China’s towering prowess in the same.

.

A. Introduction

1. ASEAN-India dialogue relations have grown rapidly from a sectoral dialogue partnership in

1992 to a full dialogue partnership in December 1995. The relationship was further elevated with

the convening of the ASEAN-India Summit in 2002 in Phnom Penh, Cambodia. Since then the

ASEAN-India Summit has been held annually. All these took place in a decade, which clearly

signifies the importance of the dialogue partnership to ASEAN and India and the progress made

in the cooperation.

B. Political and Security Cooperation

2. Since India became a Dialogue Partner of ASEAN, the collaboration has transcended the

realm of functional cooperation to cover political and security dimensions. India participates in a

series of consultative meetings with ASEAN under the ASEAN-India Dialogue Relations, which

include Summit, ministerial meetings, senior officials meetings, and meetings at experts level, as

well as through dialogue and cooperation frameworks initiated by ASEAN, such as the ASEAN

Regional Forum (ARF), the Post Ministerial Conference (PMC) 10+1, the East Asia Summit

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(EAS), Mekong-Ganga Cooperation and Bengal Initiative for Multisectoral Technical and

Economic Cooperation (BIMSTEC), which help contribute to enhancing regional dialogue and

accelerating regional integration.

3. In demonstrating its commitment and shared interest to ensuring peace, security, stability and

development in Southeast Asia, India acceded to the Treaty of Amity and Cooperation in

Southeast Asia (TAC) on 8 October 2003 during the 2nd ASEAN-India Summit in Bali,

Indonesia. At the same occasion, ASEAN and India also signed a Joint Declaration for

Cooperation in Combating International Terrorism, symbolizing concrete initiatives to step up

cooperation in the fight against terrorism.

4. As a reflection of the interest of ASEAN and India to intensify their engagement, the ASEAN-

India Partnership for Peace, Progress and Shared Prosperity, which sets out the roadmap for

long-term ASEAN-India engagement, was signed at the 3rd ASEAN-India Summit on 30

November 2004 in Vientiane. A Plan of Action (2004-2010) was also developed to implement

the Partnership. Subsequently, the new ASEAN-India Plan of Action for 2010-2015 was

developed and adopted by the Leaders at the 8th ASEAN-India Summit in October 2010 in Ha

Noi.

5. Following the entry into force of the ASEAN Charter, and based on the strong foundation of

the ASEAN-India Dialogue Relations, India has appointed H.E. Mr Biren Nanda as its current

Ambassador to ASEAN.

6. ASEAN and India will mark the 20th anniversary of their dialogue relations in 2012 with a

Commemorative Summit to be held in India. A number of commemorative activities have been

planned and carried out to signify the expanding and deepening of the dialogue partnership.

7. In this connection, the ASEAN-India Eminent Persons group (EPG) has been established to

take stock of ASEAN-India relations over the past 20 years, explore ways to widen and deepen

existing cooperation between ASEAN and India, as well as recommend measures to further

strengthen ASEAN-India relations in the future, taking into account existing documents

signed/adopted by both sides, as well as key ASEAN documents, particularly the ASEAN

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Charter, Roadmap for an ASEAN Community, the three Blueprints of the ASEAN Community

and other relevant documents. The EPG is expected to present their final report and

recommendations to the 10th ASEAN-India Summit in December 2012.

C. Economic Cooperation

8. Volume of trade and investment flows between ASEAN and India remained relatively low

compared with other dialogue partners of ASEAN. Between 1993 and 2003, ASEAN-India

bilateral trade grew at an annual rate of 11.2%, from US$ 2.9 billion in 1993 to US$ 12.1 billion

in 2003.

9. In 2010, the total trade between ASEAN and India was US$ 55.4 billion, a growth of 41.8 %

from US$39.1 billion in 2009. This accounted for 2.7% of the total ASEAN trade in 2010. As for

foreign direct investment (FDI), the inflow from India to ASEAN Member States was US$ 2.58

billion, an increase of 221.6% from US$811.18 million in 2009 . This accounted for 3.4 % of the

total FDI into ASEAN in 2010 . Despite impact of the global financial/economic crisis, India

remained the seventh largest trading partner of ASEAN and the sixth largest investor in ASEAN

in 2009. At the 8th ASEAN-India Summit in October 2010, the Leaders reaffirmed their

commitment to achieve bilateral trade target of US$ 70 billion by 2012. The ASEAN-Dialogue

Partners trade and investment statistic data can be accessed

through http://www.asean.org/22122.htm

10. Acknowledging this trend and recognizing the economic potential of closer linkages, both

sides recognized the opportunities for deepening trade and investments, and agreed to negotiate a

framework agreement to pave the way for the establishment of an ASEAN-India Free Trade

Area.

11. 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 eventual establishment of an ASEAN-India Regional Trade and Investment Area

(RTIA), which includes FTA in goods, services and investment.

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12. ASEAN and India signed the ASEAN-India Trade in Goods (TIG) Agreement in Bangkok

on 13 August 2009 after six years of negotiations. The signing of the ASEAN-India Trade in

Goods Agreement paves the way for the creation of one of the world's largest free trade areas

(FTA) - market of almost 1.8 billion people with a combined GDP of US$ 2.8 trillion. The

ASEAN-India FTA will see tariff liberalization of over 90% of products traded between the two

dynamic regions, including the so-called "special products," such as palm oil (crude and refined),

coffee, black tea and pepper. Tariffs on over 4,000 product lines will be eliminated by 2016, at

the earliest. The ASEAN-India TIG Agreement entered into force on 1 January 2010.

13. ASEAN and India are currently negotiating the ASEAN-India Trade in Services and

Investment Agreements, targeted for early conclusion.

14. ASEAN and India are also working on enhancing private sector engagement, including the

re-activation of the ASEAN-India Business Council (AIBC), the holding of the first ASEAN-

India Business Summit (AIBS) and an ASEAN-India Business Fair (AIBF) held in New Delhi

on 2-6 March 2011. The events were part of the efforts to stimulate trade and business-to-

business interaction.

15. The 14th ASEAN Transport Ministers (ATM) Meeting on 6 November 2008 in Makati,

Metro Manila, Philippines adopted the ASEAN-India Aviation Cooperation Framework, which

will lay the foundation for closer aviation cooperation between ASEAN and India.

16. In tourism, the number of visitor arrivals from India to ASEAN in 2010 was 2.47 million, an

increase from 2.1 million 2009. At the 6th ASEAN-India Summit held on 21 November 2007 in

Singapore, India proposed to set a target of 1 million tourist arrivals from ASEAN to India by

2010. The 2nd Meeting of ASEAN and India Tourism Ministers (ATM+India) held on 25

January 2010 in Bandar Seri Begawan supported the establishment of the ASEAN Promotional

Chapter for Tourism (APCT) in Mumbai, India as an important collaborative platform for

ASEAN National Tourism Organizations (NTOs) to market Southeast Asia to the Indian

consumers and, at the same time, create mutual awareness between ASEAN Member States and

India. The registration of APCT and its activities commenced in 2011.

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17. To further enhance tourism collaboration between ASEAN and India through concrete

activities, during the 3rd ATM+India held on 12 January 2012 in Manado, Indonesia, the

ASEAN and India Tourism Ministers signed the Memorandum of Understanding (MoU)

between ASEAN and India on Strengthening Tourism Cooperation, which would serve as the

key instrument for more action-oriented cooperation, encouraging both parties to cooperate in

facilitating travel and tourist visits and further strengthen the close tourism partnership. The

Ministers also welcomed the forthcoming ASEAN-India Car Rally to be organized in 2012. This

Rally would mark another meaningful step forward in ASEAN-India tourism cooperation and at

the same time reflect the existence of land route connectivity that would facilitate tourism

exchange between ASEAN and India.

18. Significant developments can also be seen in the cooperation in the agriculture and forestry

sector as ASEAN and India have successfully held the first ASEAN-India Ministerial Meeting

on Agriculture and Forestry on 8 October 2011 in Jakarta, Indonesia. The Ministers adopted the

Medium Term Plan of Action for ASEAN-India Cooperation in Agriculture (2011-2015) with

the view to promoting and intensifying cooperation in the agriculture and forestry sector between

ASEAN and India, in order to meet the challenges of food security, to exchange information and

technology, to cooperate on research and development projects, to encourage agriculture and

forestry-related industries, and to strengthen human resources development.

D. Socio-Cultural Cooperation.

19. Over the years, ASEAN-India socio-cultural cooperation has been expanded to include

human resource development, science and technology (S&T), people-to-people contacts, health

and pharmaceuticals, transport and infrastructure, small and medium enterprises (SMEs),

tourism, information and communication technology (ICT), agriculture, energy and Initiative for

ASEAN Integration (IAI). All cooperation projects are funded by the ASEAN-India Fund (AIF).

20. Cooperation in these areas are carried out through the implementation of the Plan of Action

(PoA) to Implement the ASEAN-India Partnership for Peace, Progress and Shared Prosperity,

which was adopted by the Leaders at the 3rd ASEAN-India Summit in November 2004 in

Vientiane. The PoA is carried out through activities under the various existing ASEAN sectoral

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work plans, Declarations concluded between ASEAN and India, as well as priority activities

under the Roadmap for an ASEAN Community 2009-2015 that could be implemented with

India.

21. The 7th ASEAN-India Summit held in October 2009 also noted with satisfaction the steady

progress of implementation of the ASEAN–India Partnership for Peace, Progress and Shared

Prosperity. The Summit also agreed on a new and more enhanced phase of the Plan of Action to

implement the said Partnership in order to seize the opportunities and overcome the challenges

arising from the global financial crisis and evolving political and economic landscape.

Subsequently, the new ASEAN-India Plan of Action for 2010-2015 was developed and adopted

by the Leaders at the 8th ASEAN-India Summit in October 2010 in Ha Noi.

22. India is also actively contributing to the implementation of the IAI Work Plan with the

implementation of some of the IAI projects/activities, such as the Entrepreneurship Development

Centers (EDC) and the Centers for the English Language Training (CELT) in Cambodia, Lao

PDR, Myanmar and Viet Nam. India also agreed to support the establishment of a CELT in

Indonesia.

23. Pursuant to the announcement by the Prime Minister of India during the 6th ASEAN-India

Summit held in November 2007, the ASEAN-India Green Fund with an initial contribution of

US$ 5 million was set up in 2010 to support cooperative pilot projects between ASEAN and

India for promotion of technologies aimed at promoting adaptation to and mitigation of climate

change. In addition, the ASEAN-India S&T Development Fund with an initial fund of US$ 1

million was established to encourage collaborative R&D and technology development between

ASEAN and India. In 2007, India made a contribution of US$ 1 million to the ASEAN

Development Fund (ADF).

24. The ASEAN Leaders also welcomed the announcement made by Prime Minister Manmohan

Singh to allocate, during the period of ASEAN Work Plan, US$ 50 million to the ASEAN-India

Cooperation Fund and the ASEAN Development Fund in support of the above initiatives, as well

as IAI programme and projects in the areas of education, energy, agriculture and forestry, SMEs

and implementation of the ASEAN ICT Master Plan.

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CONCLUSIONS

ASEAN-India relations have come a long way since their turbulent Cold War phase. The 1990s

have seen a distinct rise in their interaction along with firm measures to integrate and cooperate

in the economic as well as political spheres. Their partnership has progressed from a sectoral

dialogue partnership to a summit level interaction within a decade i.e. 1992-2002. With the

ASEAN-India FTA in the offing, this partnership only stands to be further strengthened. There is

a clear sense that ASEAN intends to integrate the East Asian region into one consolidated

4

AASSEEAANN’’ss MMeemmbbeerr CCoouunnttrriieess

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regional bloc and it is certain of the importance of having India as a part of it. ASEAN sees India

as an emerging power in Asia and is keen to develop relations with it that would be beneficial to

countries within ASEAN and to the region as a whole. It realizes that India possesses large

strategic capabilities and can be a strong stabilizing force in the region. Economically, India,

with its burgeoning middle class, can be a significant market for ASEAN manufactures and

consequently, an important source of welfare for the region. There is a lot that ASEAN can gain

from India’s development in its service sector and it looks to develop wide ranging economic

partnerships with her. India understands that the ASEAN grouping consists of countries which

have achieved significant development in the past 20 years. It is in its interest to establish

beneficial linkages with the countries to benefit from their past experience and current standing.

There is large potential in the synergies between its economy and that of the ASEAN countries

and is keen to strengthen its economic ties with them. ASEAN’s strategic location makes its

stability crucial for India’s energy and economic security, and it looks to develop its influence in

the region by forging vital ties with ASEAN. The ASEAN-India partnership holds ample

potential for a successful future. As things stand, it is evident that both India and ASEAN are

keen to establish a strong relationship with a long-term emphasis on greater cooperation and

integration, apart from the strengthening of economic and strategic ties. While there are definite

challenges to be addressed before achieving a consolidated East Asian Community, it is evident

that conscious efforts are being made on both the sides in developing synergies for the shared

prosperity and mutual benefit of India, ASEAN and the Asian region at large.