Role of ASEAN-India Free Trade Agreement in India’s International Trade

Abstract

Emerging economics view Foreign Trade Agreements (FTAs) as a means of development through reduced tariffs and access to low cost products. They not only lead to development of secure international trade but also promote manufacturing in domestic territories. AIFTA (ASEAN India Free Trade Agreement) inked in 2010 paved way for much needed manufacturing and trade boost for both India and ASEAN member states. With more than a decade’s performance till date, this research paper attempts to evaluate the role AIFTA played in meeting the intended objectives. This qualitative research is based on secondary data released by government of India. An attempt has been made to draw patterns and examine if ASEAN countries occupy a prominent place in India’s international trade. Further a comparison with major trading partners (USA, UAE, UK, China and Australia) reveals that a lot needs to be done. It is observed that the trade deficit of India with ASEAN is continuously increasing, depicting a case of trade diversion instead of trade creation against the expected lines.A deeper look at top fifteen commodity groups internationally traded by India highlight the role of only two ASEAN nations and more policy boosts are needed to reap desired benefits from ‘look east policy’ of the government. In order to bolster economic development, augment manufacturing sector and generate employment India needs to strategically look at bilateral trade options with each of the member states or revisit ASEAN FTA to for trade to peak leading to economic growth.