The India-ASEAN Free Trade Agreement (AITIGA), which came into force in 2010, is widely considered to have not worked for India primarily due to a widening trade deficit and asymmetry in market access.

India’s concerns are driven by the fact that its imports from the ASEAN bloc have surged at a much faster pace than its exports, resulting in a substantial and growing trade imbalance in favor of ASEAN member states.

📈 Widening Trade Deficit

The most prominent indicator of the FTA’s underperformance for India is the significant increase in its trade deficit with ASEAN.

• Disproportionate Import Growth: Between the implementation of the FTA and recent years, India’s imports from ASEAN have grown far more dramatically than its exports. For example, in the first decade of the agreement, reports indicate India’s exports to ASEAN grew by around 65%, while imports from the region surged by 186%.
• Trade Deficit Figures: The annual trade deficit has expanded considerably. From approximately $5 billion when the agreement was signed in 2009, it has grown to over $40 billion in recent fiscal years (e.g., $43.57 billion in FY 2022-23).
• Key Import Items: The imports are dominated by commodities and manufactured goods such as mineral fuels (e.g., coal), palm oil, and electronic products, with the latter’s industry in ASEAN being a major beneficiary of the FTA.

⚖️ Asymmetry and Structural Issues

The FTA has been criticized for having structural weaknesses and an imbalance in concessions that favor ASEAN economies.

• Unequal Tariff Liberalization: Critics argue that the agreement was negotiated without adequately safeguarding Indian interests, leading to an imbalance in market opening.
  • India’s Concessions: India agreed to eliminate or reduce tariffs on a larger percentage of its traded products (around 71% of tariff lines) and offered a single tariff schedule to all ten ASEAN members.
  • ASEAN’s Concessions: Several ASEAN countries were not required to extend similar concessions, with some (like Indonesia, Thailand, and Vietnam) offering tariff reductions on a significantly lower percentage of their traded products.
• Non-Tariff Barriers (NTBs): Indian exporters face significant non-tariff barriers in ASEAN markets. These include:
  • Stringent technical standards and Sanitary and Phytosanitary (SPS) measures (especially for agricultural goods).
  • Complicated licensing and regulatory hurdles.
  • Inspection delays that impede Indian goods and services from gaining effective market access, despite tariff reductions.
• Rules of Origin (RoO) Misuse: There are concerns that the FTA is being misused. Goods from third countries, particularly China, are allegedly being routed through ASEAN member states with minimal processing to take advantage of the lower or zero tariffs on entering the Indian market. Lax implementation of the RoO in some cases is believed to facilitate this.

🏭 Domestic and Economic Factors

Underlying economic structures and capacity differences between India and the ASEAN bloc also contribute to the uneven outcome.

• ASEAN’s Manufacturing Advantage: ASEAN economies are heavily export-oriented and possess strong, integrated manufacturing ecosystems and global supply chains (especially in electronics and automobiles). This makes their goods more competitive in the Indian market.
• India’s Economic Structure: India’s economy has strong growth in services and agriculture, sectors that have not sufficiently benefited from the agreement, while its manufacturing sector often struggles to compete with the cheaper, mass-produced imports from ASEAN. The domestic industry, especially Micro, Small, and Medium Enterprises (MSMEs), feels undercut.