Why in the news?

The review aims to address concerns such as the inverted duty structure, which puts local manufacturers at a disadvantage.

Trade deficit issue with ASEAN 

• High trade deficit: The trade deficit between India and the Association of Southeast Asian Nations (ASEAN) has been a significant issue, with the deficit widening to USD 43.57 billion in the last fiscal from USD 25.76 billion in 2021-22 and just USD 5 billion in 2010-11
•  Review AITIGA:This has led to a review of the ASEAN-India Trade in Goods Agreement (AITIGA) by 2025, aiming to address concerns about trade barriers, abuse of the agreement, and the growing trade gap between India and the ASEAN region

ASEAN-India Trade in Goods Agreement (AITIGA)

• The ASEAN-India Trade in Goods Agreement (AITIGA) is a trade agreement between the ten member states of ASEAN and India, signed in 2009 and implemented in 2010. The agreement aims to establish a free trade area between the parties, covering trade in physical goods and products, and progressively eliminating duties on 76.4 percent of goods. 

The trade deficit between India and the ASEAN region is primarily due to the following reasons:

• Tariff disparities: India’s tariffs were much higher than partner countries, leading to a significant reduction in tariffs for partner countries, which in turn caused India’s imports to grow faster than exports. This imbalance has been widening since 2010-11, the year India entered into an agreement with ASEAN
• Non-tariff barriers and regulations: India’s exports to ASEAN have been affected due to non-reciprocity in FTA concessions, non-tariff barriers, import regulations, and quotas. These factors have hindered India’s ability to fully benefit from the FTA
• Routing of goods from third countries: There have been concerns about the routing of goods from third countries, such as China, to ASEAN countries with minimum value addition and then being imported into India, misusing the India-ASEAN FTA. This practice has contributed to the growing trade deficit
• Limited market access for Indian products: India’s exports of products such as textile clothing, footwear, food products, and minerals don’t have a significant place in ASEAN imports, while there is a higher dependence on products such as vegetables, fuels, chemicals, and metals from ASEAN, which are essential commodities

 Conclusion 

India’s review of the ASEAN-India Trade in Goods Agreement aims to tackle the widening trade deficit by addressing tariff disparities, non-tariff barriers, and the misuse of the agreement, crucial steps toward fostering fair and balanced trade relations.

Mains question for practice 

Q Discuss the factors contributing to high  deficit between India and ASEAN. 

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