India-ASEAN ties face a widening trade gap, but the 2025 review offers a chance to rebalance economics with a deeper strategic partnership
The five-day visit of the Philippine President Ferdinand R. Marcos Jr. to India in August underscores the growing strategic depth of India’s Act East Policy (AEP). It marks a shift in India-ASEAN relations from a primarily economic and socio-cultural orientation to one defined by stronger defence and strategic engagement. The Philippines’ collaboration with India, exemplified by the BrahMos missile deal, joint naval exercises in the South China Sea, and potential for expanded defence exports, illustrates this evolving partnership.
As the AEP marked its tenth anniversary in 2024 and the India-ASEAN Dialogue Partnership reached 30 years in 2022, the relationship has now reached the level of a Comprehensive Strategic Partnership. However, while India pursues FTAs with the United Kingdom, European Union (EU), the United States (US), Australia, and the United Arab Emirates (UAE), frustration is mounting over the slow progress in reviewing the ASEAN-India Trade in Goods Agreement (AITIGA) due this year. Concerns persist over widening trade deficits and suspicions that some ASEAN countries serve as conduits for re-routed Chinese exports.
The ASEAN-India Trade in Goods Agreement (AITIGA), signed in 2009 and implemented in 2010, was envisioned as a catalyst for deeper economic integration between the two rapidly growing regions. Yet, more than a decade later, its outcomes invite growing scrutiny, particularly due to the widening trade imbalance that disproportionately benefits the ASEAN region.
The ASEAN-India Trade in Goods Agreement (AITIGA), signed in 2009 and implemented in 2010, was envisioned as a catalyst for deeper economic integration between the two rapidly growing regions.
Between FY 2009 and FY 2023, India’s imports from ASEAN surged by 234.4 percent, while its exports to the bloc increased by only 130.4 percent. Consequently, India’s trade deficit with ASEAN widened from US$7.5 billion in 2011 to approximately US$44 billion in 2023. These figures underscore a growing asymmetry that challenges the original promise of shared prosperity. As India-ASEAN continue their review of the AITIGA in 2025, a closer examination of the trends, concerns, and emerging opportunities is both timely and essential.
At its core, the widening trade deficit reflects the limited market access Indian producers have secured in ASEAN compared to what their ASEAN counterparts enjoy in India. Countries such as Indonesia, Malaysia, Thailand, and Vietnam have capitalised on India's large and growing consumer base, particularly in sectors like electronics, palm oil, rubber, chemicals, and machinery.
On the other hand, India's exports, dominated by petroleum products, automobiles, pharmaceuticals, and engineering goods, have faced multiple non-tariff barriers in ASEAN markets. These include stringent standards, regulatory hurdles, and delays in customs procedures, which have collectively constrained India's export potential.
Furthermore, while tariff liberalisation under AITIGA has reduced or eliminated duties on a wide range of products, the benefits have not been equally distributed across sectors. Indian SMEs, in particular, have struggled to compete with ASEAN’s more integrated production networks and efficient logistics infrastructure. This imbalance has sparked a growing discontent within the Indian industry that the current framework of AITIGA needs re-evaluation.
The Indian government has acknowledged concerns raised by domestic stakeholders, especially from sectors such as agriculture, dairy, textiles, and manufacturing. These industries contend that liberalised imports from ASEAN, particularly the cheaper, mass-produced goods, have undermined local production and employment.
This has led to a more cautious trade posture in recent years. In 2019, India opted out of the Regional Comprehensive Economic Partnership (RCEP), citing concerns over a similar trade imbalance, particularly with China. The experience with AITIGA undoubtedly informed this decision. While ASEAN remains a trusted partner, the growing trade gap underscores the need to safeguard national economic interests while remaining committed to regional cooperation.
India opted out of the Regional Comprehensive Economic Partnership (RCEP), citing concerns over a similar trade imbalance, particularly with China.
India has since signalled its intent to renegotiate certain provisions of AITIGA. The review featured prominently in PM Modi’s address at the India-ASEAN Summit in Lao PDR, where he emphasised the importance of addressing non-tariff barriers and seeking reciprocal market access.
From ASEAN’s perspective, India is a valuable partner, not just economically, but also strategically, amid intensifying geopolitical contestation in the Indo-Pacific. However, for many ASEAN members, India still ranks relatively low as an export destination compared to China, the US, Japan, or the EU.
This means that ASEAN states may have limited incentive to revise the agreement unless there is a clear convergence of political and economic interests. Moreover, ASEAN’s own integration through the ASEAN Economic Community (AEC) enables member states to benefit from regional supply chains, thereby reducing their dependency on any single external partner.
India will need to make a compelling case that a rebalanced agreement will benefit both sides. This includes highlighting complementarities in emerging sectors, such as digital trade, pharmaceuticals, health technology, clean energy, and education services, where Indian capabilities align with ASEAN development goals.
For India, the 2025 review represents an opportunity to recalibrate its engagement with ASEAN by playing to its strengths and addressing long-standing challenges. Some key focus areas could include:
As India undertakes the 2025 review of the AITIGA, it must balance pragmatism with ambition. While the current agreement has facilitated greater trade flows, the benefits have been skewed. The next phase of engagement must correct this imbalance by emphasising quality over quantity in trade, building institutional trust, and aligning economic integration with strategic convergence.
The review should not be seen merely as a course correction but as an opportunity to reimagine the bilateral economic partnership. As two of the most dynamic regions in the Indo-Pacific, India-ASEAN have much to gain by aligning their trade priorities with 21st-century realities: digitalisation, sustainability, inclusive growth, and strategic autonomy.
The next phase of engagement must correct this imbalance by emphasising quality over quantity in trade, building institutional trust, and aligning economic integration with strategic convergence.
It must be acknowledged that, despite its shortcomings, India-ASEAN trade has grown sixfold over the past two decades. Today, ASEAN is a key partner for India, with bilateral trade exceeding US$120 billion and investments of a similar magnitude. The bloc ranks among India’s top five trading partners, alongside the US, China, UAE, and the EU. In this context, public criticism of ASEAN during ongoing trade negotiations risks being counterproductive. Frequent high-level statements from India have reportedly led to discomfort among ASEAN negotiators and risk undermining the negotiation atmosphere.
Despite differences, progress has been made in the ASEAN-India Trade in Goods Agreement (AITIGA) review. The virtual meeting between India’s Commerce Minister, Piyush Goyal, and Malaysia’s Economy Minister, Tzafrul Aziz, appears to have brought negotiations back on track. ASEAN's US$3.5 trillion economy offers market access to over 600 million people. Indian exports such as pharmaceuticals, automobiles, and electronics enjoy tariff-free access but face non-tariff barriers and uneven market openness: Indonesia, for example, offers only 44 percent access. Moreover, the underutilisation of AITIGA by Indian industries, contrasted with Japanese and Korean supply chains operating from India, points to a need for domestic reforms and improved competitiveness rather than placing blame solely on ASEAN.
India has a significant workforce in ASEAN, especially in digital and service sectors, which are often overlooked unless highlighted by crises like cybercrime-related detentions. Additionally, Indian firms actively raise capital in Singapore’s bond market and, in Malaysia, access low-cost finance through conventional and Islamic bond instruments, deepening economic interdependence.
The trade deficit that India faces with ASEAN is not just a statistical concern; it is emblematic of a broader asymmetry in the relationship that needs redress. A rebalanced agreement would enable India to protect its domestic industries while enhancing exports in high-growth sectors. For ASEAN, a stronger Indian economy integrated with its own would provide a counterbalance in a multipolar Asia.
Given the state of the world, partnerships of South-South like that between India and ASEAN need to be strengthened rather than allowed to fester.
Ultimately, the success of the 2025 FTA review will depend on whether both sides can move from transactional trade negotiations to a transformational economic partnership. Such a shift requires political will, business confidence, and a shared vision of a free, open, and inclusive Indo-Pacific.
Gurjit Singh has served as India's ambassador to Germany, Indonesia, Ethiopia, ASEAN and the African Union.
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Gurjit Singh has served as Indias ambassador to Germany Indonesia Ethiopia ASEAN and the African Union. He is the Chair of CII Task Force on ...
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