Ahead of India-Asean FTA review: Industry flags spike in import of 38 items

Import of as many as 38 items from Asean members sees a sharp surge in H1FY24

India is gearing up for a review of the 13-year-old trade pact with the Association of Southeast Asian Nations (Asean) against the backdrop of a surge in the import of as many as 38 items, including laptops, IT hardware, telecom equipment, and stainless steel products, during the first six months of the current financial year.

The spike in imports was witnessed mainly from countries such as Singapore, Thailand, Indonesia, Malaysia, Vietnam, and the Philippines, people aware of the matter told Business Standard.

The 10-member Asean grouping also includes Brunei Darussalam, Cambodia, Laos, and Myanmar. The India-Asean free trade agreement (FTA) was signed in August 2009, and the deal came into force 2010 onwards.

While the department of commerce has begun the exercise of compiling and analysing trade data, it has sought inputs from industry executives and asked them to share their concerns with respect to the deal, which till now has resulted in a trade balance in favour of Asean.

The industry has raised an alarm regarding the jump in imports during the April-September period, one of the persons cited above said.

There has been a substantial increase in imports of items such as laptops, electronic equipment such as amplifiers, monolithic integrated circuits and gear boxes, metals such as nickel, lead and steel scrap, and p-Xylene, which is used in the production of polyester, from Singapore.

Similarly, there has been a surge in the import of solar PV cells, telecom equipment, steel bars and rods, jewellery and AC parts from Thailand; plastics, aluminium ingots and solar PV cells from Malaysia; and lithium-ion, telecom and electronic equipment, and flat steel products from Vietnam.

The review of the FTA has been a long-standing demand of Indian businesses, especially because India hopes to diversify trade while addressing the “current asymmetry of bilateral trade”. Both sides aim to conclude the review and negotiations of the existing agreement by 2025.

Apart from the widening trade deficit, India has been worried about the routing of goods from non-Asean countries through Asean countries by taking the duty advantages of the agreement. Towards this, government officials said India is pushing for the tightening of the ‘rules of origin’ norms under the existing FTA.

‘Rules of origin’ determine the criteria for which goods are eligible for free imports, with the larger idea to avoid routing of products manufactured in third countries to India.

In FY23, India’s exports to Asean increased to $44 billion from $42.32 billion a year ago. However, imports grew at a faster pace and jumped to $87.57 billion in FY23 as against $68 billion in FY22. The trade deficit widened to $43.57 billion in FY23 from $25.76 billion the previous year. It was just $5 billion in FY11.

In August, Commerce and Industry Minister Piyush Goyal had said the trade agreement with Asean was an “ill-conceived” pact and unfair to Indian industry.