ASEAN–India Free Trade Agreement (FTA) and its Impact on India
| Author | Murali Kallummal,Rajan Sudesh Ratna |
| DOI | 10.1177/0015732513504713 |
| Published date | 01 November 2013 |
| Date | 01 November 2013 |
| Subject Matter | Commentary |
ASEAN–India Free Trade
Agreement (FTA) and its
Impact on India: A Case
Study of Fisheries and
Selected Agricultural
Products*
Rajan Sudesh Ratna
Murali Kallummal
Abstract
The ASEAN–India Free Trade Agreement (FTA) has brought opportunities as
well as challenges to the Indian industry since it came into force on 1 January
2010. There is no clear-cut estimates about the gains which will come to India
especially in the sectors of agriculture, plantation and fisheries. However, some
of the sectors which are labour intensive or unorganized will be facing bigger
challenges.
This article attempts to examine the impact of FTA where the tariff is either
reduced or eliminated on some of the agricultural products like fisheries, tea
and coffee, which have been projected as sensitive for India. The commitment of
India and ASEAN under the FTA is analyzed along with the trade and tariff data.
While doing so the article looks at some of the empirical evidence to examine
the impact of India’s unilateral tariff liberalization in the Post-Uruguay Round
by taking into consideration India’s imports, domestic production, etc. These
results are then extrapolated to examine the impact of tariff liberalization on the
domestic economy in view of India’s commitment in the ASEAN–India FTA.
The study is divided into three parts. The first part deals with the history of
India–ASEAN relationship and highlights the features of India–ASEAN FTA. The
second part does a case study of fisheries, tea and coffee with regard to FTA and
likely impact on India. The final part gives a broad conclusion of the study.
The study first looks at the bilateral trade data and then highlights the salient
features of India–ASEAN FTA. It then reviews some of the literary works that
Commentary
Foreign Trade Review
48(4) 481–497
©2013 Indian Institute of
Foreign Trade
SAGE Publications
Los Angeles, London,
New Delhi, Singapore,
Washington DC
DOI: 10.1177/0015732513504713
http://ftr.sagepub.com
Rajan Sudesh Ratna, Economic Affairs Ofcer, Trade and Investment Division,
UNESCAP, Bangkok, Thailand. Email: rsratna@gmail.com
Murali Kallummal, Associate Professor, Centre for WTO Studies, IIFT, New Delhi,
India. E-mail: muralikallummal@gmail.com
* The views expressed by the authors are purely personal and may not reflect the views
of the institute.
Foreign Trade Review, 48, 4 (2013): 481–497
482 Rajan Sudesh Ratna and Murali Kallummal
have been carried out in this regard. The study thereafter looks at the histori-
cal trends of production, prices, trade values and tariffs on identified items at a
national level as well as the items in India’s tariff liberalization programme (TLP).
In the next section, while identifying the position, it also examines the position
of these items in ASEAN’s TLP so as to assess whether Indian producers will get
equal opportunities for preferential market access there or not. A comparison
of the unit value price of Indian producers as well ASEAN members has been
made to look at their respective competitiveness not only in the international
markets but in each others’ market as well. The study gives its finding at the end
summarizing the threats and the opportunities for Indian producers.
JEL: F02, F13, F20, C00, C22
Keywords
FTA, India, ASEAN, tariff, trade liberalization, WTO
Background
India’s engagement with the Association of South East Asian Nations (ASEAN)
started with its ‘Look East Policy’ in the year 1991. Since its beginning, the part-
nership between India and ASEAN comprising Brunei, Cambodia, Indonesia,
Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam has
been developing at quite a fast pace. The Free Trade Agreement (FTA) in goods
was signed in August 2009 (Bangkok, Thailand) and implementation began from
1 January 2010. The agreement paves the way to mutually eliminate tariffs on
approximately 4,500 products in a time-bound manner. India and ASEAN have
set an ambitious target of achieving bilateral trade of US$ 50 billion by 2010 and
both sides expect that FTA would help achieve this target.
India–ASEAN Trade and Economic Linkages
The deepening of ties between India and ASEAN is reflected by the fact that the
bilateral trade grew by over 28 per cent from US$ 30.4 billion in 2006–2007 to
US$ 39.05 billion in 2007–2008. ASEAN has now become India’s fourth-largest
trading partner after the EU, the US and China. A summary of India’s trade with
ASEAN is given in Figure 1.
It is seen that the India’s balance of trade (BoT) is in favour of ASEAN coun-
tries and the gap is widening every year since 2004–2005. India’s adverse BoT
with ASEAN saw a rise from US$ 688 million in 2004–2005 to US$ 5.7 billion in
2011–2012. This event can be attributed to the rise in bilateral imports mainly
from Malaysia, Indonesia, Singapore, Myanmar and Thailand and thus from
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