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Jaibal Naduvath, “India and Thailand: The Compelling Case for a Deeper Compact,” ORF Special Report No. 303, Observer Research Foundation, April 2026.
India and Thailand share over two millennia of cultural and commercial contact. Its impact was such that Paul Wheatley, the renowned historical geographer, observed that “the peoples of western Southeast Asia came to think of themselves as part of Bharatavarsa… [representing] one of the most impressive instances of large-scale acculturation in the history of the world.”[1] While imperial politics later recast alignments, India has endured as a civilisational reference point in the Thai imagination. While Thailand was among the first countries to recognise India’s independence, divergent strategic gazes meant these linkages were not being fully leveraged. Thailand was aligned with the United States (US)-led architecture during the Cold War, and, from the mid-2000s, China emerged as a second axis. India, meanwhile, stayed away from bloc politics, instead strengthening partnerships in the West and building a franchise in the Global South. That equilibrium is now shifting amid growing unpredictability in traditional relationships. India’s Act East policy and Thailand’s Act West policy reflect this shift, and the elevation of ties to a strategic partnership must be read in this context.
The US, long Thailand’s principal strategic partner, is increasingly viewed in Bangkok as unpredictable. From the harsh American response to the 2014 political developments to the punishing tariffs imposed by President Donald Trump, a series of acrimonious episodes have chipped away at the sense of security once implicit in the notion of a solid Thai–US compact.[2] This has created space for China, which over the past decade has mounted a franchise-building offensive that blends hard and soft power elements, from large‑scale investments and aid to building closer people-to-people ties, curating media narratives, and expanding presence in Thailand’s cultural sphere.[3],[4],[5] Yet this relationship is not uncomplicated. China’s assertive posturing in contested maritime spaces,[6] its close relationship with Cambodia,[7] predatory geo-economic approaches,[8] and coercive diplomacy[9] have generated unease in Bangkok.
While the US and China remain deeply entrenched in Thailand's strategic schema, these dynamics have prompted Bangkok to diversify risk, with India emerging as a third axis.[10] India has begun to feature seriously in Thailand's strategic calculus in recent years. Its expanding economic heft and market potential, combined with China’s reluctance to address the widening trade imbalance—estimated at roughly US$48 billion (about 11 percent of Thai GDP) in the first three quarters of 2025—have heightened concerns about dependence.[11] Thailand, on the other hand, runs a trade surplus with India.[12] India’s growing prowess, coupled with its ability to exercise sovereign choices amid great-power pressures, is seen as insulating the relationship from external coercion. Its conditionality-free approaches and willingness to share sensitive technologies are viewed as supporting Thailand’s self-reliance ambitions. The absence of strategic baggage, despite a shared maritime boundary,[13] is viewed as a use case of how India manages differences and how any potential future disputes would be addressed.
For India, Thailand offers unmatched advantages. There is arguably no other country in the region with which India shares such a degree of cultural and values alignment. Thailand’s advanced manufacturing base and established global supply chains offer a pathway for India to accelerate its progress up the global value chains (GVCs), critical to its Viksit Bharat 2047 mission. Thailand also serves as a critical interface with the fragmented Myanmar theatre, which has serious implications for India’s security; notably, it shares its longest land border with Myanmar. Further, while most larger powers in the region tend to view India as a comparator and see limited room for India to contribute to their aspirations, Thailand sees India as a partner whose capabilities can most help catalyse its ambitions. This convergence of interests presents collaborative possibilities.
This report identifies five key sectors for India-Thailand cooperation that present deep complementarities while delivering early-harvest gains: Semiconductors; Artificial Intelligence (AI); Automotives; Micro, Small and Medium Enterprises (MSMEs); and Tourism. Leveraged effectively, these sectors can deepen economic integration and accelerate national aspirations. For India to advance its Viksit Bharat mission, it needs reliable partners with which it shares large intersecting interests. For Thailand to achieve its ambitions as a global value creator, it needs a global power with economic depth that operates beyond the confines of predatory leverage. Thailand is the partner that India needs, and vice versa.
This report draws on inputs from subject matter experts, official policy documents, and government statements from both sides, alongside reports from multilateral organisations, academia, think tanks, news agencies, financial institutions, and industry bodies, to map the convergences in interests, capabilities, and trajectories that define the India–Thailand relationship today. The five sectors around which this analysis is organised represent the deepest complementarities and the most attainable early-harvest gains. Each section assesses current positions, points of intersection, and cooperative pathways that are politically and economically feasible in the near term. Longer-term and more sensitive domains, such as defence manufacturing, space, and pharmaceuticals, while important, lie beyond the report’s primary remit and merit separate analyses. The focus remains on areas where momentum can be built quickly, as early gains provide a solid foundation to convert strategic intent into a durable partnership.
Semiconductors are central to modern electronic systems, enabling devices from computers and smartphones to automobiles and aircraft. This also makes them susceptible to weaponisation. For instance, sweeping US export controls in October 2022 restricted China’s access to advanced computing and semiconductor manufacturing equipment, potentially slowing its development in areas such as supercomputing, AI, and new weapons systems.[14] As a result, self-reliance in semiconductor manufacturing and Intellectual Property (IP) has become a pillar of sovereignty.
India has placed advanced semiconductor manufacturing at the centre of its growth roadmap. The ambitious India Semiconductor Mission (ISM) of December 2021 aims to build a strong domestic semiconductor and display ecosystem.[15],[16] The revamped ISM 2.0, announced in the Union Budget 2026-27,[17] represents a major leap in deepening India’s semiconductor ecosystem, “producing semiconductor equipment and materials in India, designing full-stack Indian semiconductor intellectual property” and making it a global semiconductor hub.[18] Notably, as of December 2025, ISM projects worth over INR 1.6 lakh crore (~US$19.5 billion) have been approved across six states (which were not named in the government’s press release).[19] The size of India’s semiconductor market was estimated to be about US$50 billion in 2024-25 and is expected to reach US$100–110 billion by 2030.[20] However, rapid AI adoption is driving demand for more efficient and powerful chips,[21] requiring India to supplement domestic production through imports or co-production in the near to medium term. This, in turn, necessitates partnerships with countries unlikely to weaponise supply chains in times of geopolitical stress.
Thailand ranks second after India in semiconductor manufacturing among emerging economies, as per a 2024 Kearney report.[22] The country has emerged as a critical global hub for semiconductor assembly, packaging, and testing (ATP), particularly in analogue and power electronics used in electric vehicles and data centres. Thailand’s reputation for political neutrality makes it an attractive destination for businesses to set up manufacturing facilities.[23] Amidst the China–US geopolitical tensions, for instance, companies across the chips and electronics value chain, especially printed circuit board (PCB) manufacturers previously concentrated in Taiwan and China, have flocked to Thailand, making it a global hub for PCB production.[24] PCBs are the core substrate on which semiconductors are mounted.
Thailand is now actively courted by Western, Taiwanese, and Chinese firms investing in chip manufacturing.[25] While these companies are rapidly scaling production in Thailand to meet global demand, most of the high-value design and IP remain offshore, with Thai facilities mainly performing contract manufacturing and assembly.[26] Thailand’s role in the semiconductor chain is currently concentrated at the downstream ATP stage, which represents only a small share of total value added. While Thailand holds roughly 2 percent of global ATP capacity, close to 80 percent of value in semiconductors is captured upstream in chip design and wafer fabrication, segments where Thailand currently lags in terms of critical minerals and technology.[27] Thai industry leaders have flagged this downstream concentration as exposing Thailand to the risk of remaining locked into low-value segments in a perpetual ‘producer-only’ mode.[28] But that could change.
The National Semiconductor and Advanced Electronics Industry Policy Committee of Thailand (commonly referred to as the National Semiconductor Board or NSB) was established in late 2024 to address this challenge and move the country up the value chain.[29] Towards this end, Thailand has unveiled an ambitious long‑term semiconductor strategy through a draft National Semiconductor Roadmap 2050, a 25‑year plan to become a “technology‑owning chip producer” under the banner of ‘Made‑in‑Thailand Chips’.[30] The roadmap prioritises five segments—power, sensor, photonics, analogue, and discrete semiconductors—central to Thailand’s core industries, such as automobile manufacturing and electronics. Over the period 2026–2050, the strategy envisions mobilising more than 2.5 trillion baht (about US$81 billion) in investment, building a comprehensive semiconductor ecosystem, developing a specialised workforce of over 230,000, and supporting domestic firms in growing into globally competitive semiconductor companies.[31] In the first phase by 2029, Thailand is targeting a 500-billion baht (~US$16 billion) investment in semiconductor manufacturing,[32],[33] and deepening existing strengths such as Outsourced Semiconductor Assembly and Test (OSAT), Integrated Circuit (IC) design, and advanced electronics.[34]
Thailand’s and India’s semiconductor ambitions intersect, and each side brings complementary strengths to the table. While Thailand brings manufacturing capacity, India has depth in design and IP. India today hosts one of the world’s largest pools of chip‑design engineers and Electronic Design Automation (EDA) professionals. Over 20 percent of the world’s IC design workforce are based in India,[35] with nearly 300,000 engineers working in advanced chip design.[36] Global semiconductor majors are using India as a hub for design, verification, and embedded software development.[37] Initiatives such as the Chips to Startup (C2S) programme launched in 2022 create a pathway to leapfrog India in the chip manufacturing chain, particularly in IP creation and design and ecosystem development.[38],[39] Decades of strength in IT services, software engineering, and system integration, alongside a Trade-Related Intellectual Property Rights (TRIPS) and World Intellectual Property Organization (WIPO)-compliant IP regime, give India a distinct advantage.[40]
An India–Thailand semiconductor partnership could evolve into a co-development model spanning design–manufacturing integration, joint OSAT and materials ecosystems, and standards alignment. Joint design centres aligned with ISM 2.0 and Thailand’s National Semiconductor Roadmap,[41] and co-funded R&D and talent pipelines that link design institutes and test labs on both sides, could serve as the intellectual backbone of the partnership. The partnership must, however, focus on building capabilities grounded in demand realities to remain viable. Global semiconductor demand remains concentrated in 28 nm and above nodes, power and analogue devices, automotive chips, sensors, and discrete components.[42] These segments align closely with Thailand’s industrial profile and the capabilities of India’s growing fabrication ecosystem. Joint ecosystem development spanning materials, speciality chemicals, IP design, advanced packaging, and OSAT expansion could serve as early-harvest areas, as they do not require advanced fabrication capabilities.
Such a partnership would not only help retain more value locally in semiconductor production but also de-risk their manufacturing economies from supply‑chain weaponisation. It will also give each nation a stake in the other’s progress, making the partnership resistant to displacement. Projects such as the CG Semi OSAT joint venture in Sanand, Gujarat, where India’s CG Power and Japan’s Renesas Electronics Corporation have partnered with Stars Microelectronics of Thailand to run a large-scale OSAT line, are important first steps that can build confidence.[43]
AI is a key determinant of national power, given its transformative impact across sectors from public utilities to national security. Both Thailand and India are working to drive higher AI adoption while building sovereign AI stacks to reduce vulnerabilities from external dependence. However, the two countries are at different stages of this journey. India has made progress in developing a sovereign AI stack and has achieved high levels of AI adoption across industries. Thailand, while pursuing sovereign AI capability, is currently relying on foreign hyperscalers even as it works to expand AI adoption across its key sectors. The convergence between India’s AI capabilities and Thailand’s AI ambitions creates a strong case for deeper AI cooperation.
India has emerged as one of the world’s largest AI ecosystems. According to Stanford University’s 2024 Global AI Vibrancy Ranking, it ranks third in AI competitiveness, behind the US and China.[a],[44] India’s cross-sector AI adoption is now among the highest globally.[45] Recent surveys estimate that over a quarter of Indian companies have achieved AI maturity at scale,[46] with nearly 47 percent having substantial adoption of Generative AI (GenAI).[47] India’s AI talent pool is expected to exceed 1 million this year,[48] and the wider digital technology workforce is estimated to exceed 6 million.[49] India has over 500 AI-focused Global Capability Centres (GCCs) engaged in Research and Development (R&D), model development, and advanced analytics, among other activities. Sectors such as manufacturing and automotives; consumer goods and retail; banking, financial services and insurance and healthcare (BFSI) are leading AI adoption in India, cumulatively contributing 60 percent of AI’s total value.[50] Notably, AI is now a part of mainstream education, and Data and AI labs are being set up at a brisk pace across the country.[51]
India is treating AI as a strategic public good, prioritising sovereignty across compute, data, and foundational models.[52] The IndiaAI Mission provides the central framework for this. It is complemented by Centres of Excellence (CoEs) in AI across sectors, investments in domestic Graphics Processing Unit (GPU) capacity, the AIKosh national dataset platform, and programmes to build indigenous foundation and language models.[53] India is now integrating AI with its Digital Public Infrastructure (DPI). This is expected to enhance the efficiency of its DPI by as much as 50 to 60 percent.[54] The guiding principle is democratisation of AI, placing citizen welfare, affordability and access at the centre. This positions India as an important shaper of norms in what is projected to be a US$1.7-trillion global AI economy over the next decade.[55]
Thailand, for its part, has outlined an ambitious national AI roadmap. The National AI Strategy and Action Plan (2022–27), overseen by the National AI Committee led by the Prime Minister, seeks to make Thailand an AI-driven economy by 2027 and identifies five pillars: legal and ethical readiness, infrastructure development, workforce capacity, R&D and innovation, and national-level AI adoption.[56] The Thai government has outlined a 25-billion baht (~US$1 billion) plan to accelerate AI adoption and leadership over five years and make the country the AI hub for ASEAN, alongside programmes such as the ‘One Tambon: One Digital’ for enhancing nationwide upskilling and AI accessibility.[57] These measures are expected to result in an AI market exceeding 114 billion baht (~US$4 billion) by 2030.[58]
Thailand has also established sectoral AI Centres of Excellence in areas such as agriculture, tourism, healthcare, education, manufacturing, Thai language processing, public sector computing, and AI safety. [59] Initiatives such as the ’Super AI Engineering Project’ and ‘AI For All’ signal strong intent as the country seeks to improve its readiness, particularly in data science capabilities and R&D. To build a technically skilled talent pipeline, the country’s Higher Education, Science, Research and Innovation Policy and Strategy (2020-2027) emphasise STEM education and AI integration in education.[60]
At the same time, Thailand faces systemic constraints. A recent estimate from the Big Data Institute places Thailand’s AI and data-driven workforce at roughly 32,000 by the end of 2024, of which only around 700 were in AI-specific functions.[61] Further, adoption gaps remain. A joint study by the Thailand Development Research Institute, the Thai government, and SAP has found that only about 2 percent of Thai manufacturers have transitioned to Industry 4.0 standards, despite manufacturing accounting for roughly a quarter of national GDP[62] and being one of its largest economic drivers.[63] These challenges are slowing the pace of transformation. Underpinning Thailand’s AI adoption push is the quest for sovereign AI.[64] The deployment of Gulf Edge–Google sovereign cloud services[65] and AIS’s sovereign hyperscale cloud built on Oracle Cloud[66] are important first steps in that direction.
Thailand, however, seeks to reduce dependence on foreign hyperscalers and build an indigenous AI stack—an agenda India is already pursuing through its integrated compute, semiconductor, and foundation model strategy.[67] India’s guiding principle of ‘democratisation of AI’—placing citizens’ welfare at the centre of its AI adoption, and prioritising scale, affordability and access[68]—finds strong resonance with what Thailand hopes to achieve through AI. India’s AI progress, therefore, is being watched with deep interest in Thailand.
The understanding between Thailand’s Ministry of Digital Economy and Society and India’s Ministry of Electronics and Information Technology on Cooperation in the fields of Digital Technologies[69] as part of the India-Thailand Strategic Partnership should build to these shared interests. A starting point could be to pursue joint development of sovereign AI components. Early-harvest goals could include collaboration between Indian and Thai Centres of Excellence in AI, the expansion of Thailand’s supercomputing capacity drawing on India’s experience under the National Supercomputing Mission, and co-development of Thai-centric foundation and multimodal models.
Thailand also needs skilled talent to drive its AI ambitions.[70] India’s vast AI and technology talent pool can help Thailand bridge this gap even as it builds a domestic talent pipeline. India produces over 2.5 million STEM graduates each year and plays an important role in shaping the dynamics of the global tech workforce.[71] The vast pool of India-trained tech professionals is also playing a seminal role in Western AI enterprise, with many occupying leadership positions and shaping the global AI discourse.[72] Thailand’s needs and India’s strengths correspond. This makes a strong case for the creation of an India-Thailand AI Talent Bridge.
At the same time, fresh approaches are needed to address perception gaps and facilitate seamless two-way talent flows, which is also an important outcome area for the India-Thailand Strategic Partnership.[73],[74] In India, Thailand is primarily viewed as a tourism destination. It will need to strengthen its positioning as a destination for study and high-skilled employment as well. For comparison, an important entry point for highly skilled young Indian talent into the OECD labour markets has been the student route. In 2023, Indian tertiary-educated students comprised 14 percent of all international student enrolments in the bloc.[75]
For Indian technology firms, Thailand presents a compelling proposition.[76] Thailand offers a decent quality of life[77] at costs estimated to be nearly 60-percent lower than Singapore.[78] Thailand offers flexible wage currency arrangements, allowing employees to be paid in US dollars, euros, and other currencies.[79] The country also offers favourable tax treatment. For highly skilled workers with Long-Term Resident (LTR) visas, the income tax is just 17 percent.[80] These frameworks provide an institutional foundation for attracting high-skilled foreign professionals. Notably, on the World Bank’s Doing Business 2020 index, since discontinued, Thailand ranked 21st out of 190 economies.[81] However, businesses on both sides have tended to struggle in each other’s geographies, particularly with regulations, access, and a limited understanding of the local ecosystem. Addressing these challenges would require policy-backed safety nets, early-stage handholding by the respective governments, and regulatory facilitation. Joint industry working groups, regulatory sandboxes, and incentivising joint pilot projects will improve familiarity with each other’s systems and build confidence.
AI will define the next phase of geo-economic competition, influencing trade, industrial competitiveness, governance, and national security. An India–Thailand AI compact, designed to complement their respective strengths, would align the two nations around shared strategic interests.
Thailand is Southeast Asia’s automotive manufacturing hub and the world’s 10th-largest vehicle producer.[82] The sector, valued at over US$12.7 billion, contributes 10-11 percent to GDP and supports employment for roughly 3.3 percent of the population,[83],[84],[85] Exports make up the bulk of Thai auto manufacturing. Thai Auto Institute data peg exports at roughly two-thirds of Thailand’s total car production in 2024, with this trend continuing in 2025.[86] For 2026, the Thai Automotive Industry Association (TAIA) has set production targets of 1.5 million units and exports of 950,000 units.[87] Japanese firms have played an important role in Thailand’s evolution as an automotive manufacturing hub, starting in the early 1960s when companies such as Nissan and Toyota first set up manufacturing operations in the country, training generations of Thai engineers and technicians and laying the foundation for a robust automotive industry.[88] Today, Japanese brands account for 75 percent of car sales in Thailand,[89] with firms including Toyota,[90] Nissan,[91] and Asahi Denso[92] operating R&D and engineering centres in the country.
In 2022, Thailand outlined its ambitious plan to make at least half of its automobile production EVs by 2030, incentivising their production and use.[93] This ambition is operationalised via the National Electric Vehicle Policy Committee (commonly known as the EV Board, and established in 2020[94]), which seeks to make the country an EV manufacturing hub.[95] As per the 2022 EV import policy, manufacturers could import EVs equal to their domestic production. Such incentivisation has helped spur EV manufacturing, with the ratio standing at 1.5:1 (1.5 domestically produced units for every imported unit) in 2025, and expected to rise to 3:1 by 2027.[96] However, the slow pace of transition to EV manufacturing by most Japanese manufacturers has led to the vacuum being filled by Chinese automakers such as BYD, Great Wall Motor, SAIC, and Changan, among others, who have set up manufacturing facilities, either by themselves or through JVs with local partners for domestic sale and export.[97],[98],[99]
Closely following Chinese EV manufacturers were Chinese ancillary suppliers such as Gotion High‑Tech, SVOLT Energy, Huadian and Aosong, who now locally produce everything from batteries and electronics to tyres.[100] Today, over 100 Chinese vendors operate in the Thai auto ecosystem.[101] EVs accounted for 17 percent of vehicle sales in the first nine months of 2025, up from 9 percent in 2023, with roughly three-quarters attributed to Chinese brands.[102]
India has emerged as a global automotive hub over the past three decades. Delicensing of the sector in the early 1990s catalysed competition and innovation, enabling growth in manufacturing, R&D, and exports.[103] In the year ending March 2025, India produced 31 million vehicles, exporting about 5.4 million units, primarily two-wheelers.[104] Passenger vehicles accounted for around 15 percent of exports, with cars contributing roughly 400,000 units.[105] The sector represents about 8 percent of India’s total exports and contributes 7.1 percent to GDP, supporting over 37 million jobs.[106] Notably, 5.2 percent of global passenger vehicle sales occurred in India, and the country is the world’s largest two-wheeler market, accounting for nearly 31 percent of global two-wheeler sales.[107],[108] The sector has been identified as a key growth engine in the Viksit Bharat 2047 mission. Towards this end, the ambitious ‘Automotive Mission Plan 2047’ (AMP 2047) provides a time-bound, multi-stakeholder roadmap to transform India into a global automotives leader.[109]
Within India’s automobile ecosystem, Japanese Original Equipment Manufacturers (OEMs) and Joint Ventures (JVs) account for almost half of the passenger vehicle market, with Maruti Suzuki alone making up close to 40 percent of India’s car sales,[110] and close to half of all passenger vehicle exports from India.[111] Nearly 200 Japanese-linked OEMs and suppliers operate in India, integrating it into global supply chains.[112]
India is also scaling its EV ecosystem, targeting 30 percent EV penetration in vehicle sales by 2030.[113] To enable this, the country has established a National Mission on Electric Mobility; FAME schemes[b] (which ran until 2024); the ongoing PM E-DRIVE[c] scheme (operational until 2028), production-linked incentives (PLIs) for advanced chemistry cell batteries and EV manufacturing; and Goods and Services Tax (GST) and road tax concessions for EVs and charging infrastructure.[114] EVs today have a 7.7-percent market penetration across all segments and accounted for 2.5 percent of passenger vehicles at the end of 2024.[115],[116] India is today a hub for automotive engineering and innovation, with global automakers and suppliers operating more than 60 GCCs in India.[117] India alone accounts for over 50 percent of all automobile GCCs worldwide.[118] India-based GCCs of Japanese auto majors like Toyota, Nissan, Isuzu, Denso and Suzuki are playing a key role in developing new global vehicle platforms, EV and hybrid powertrains, battery management systems, Advanced Driver Assistance Systems (ADAS), telematics, and connected‑car technologies.[119]
Japanese OEMs and component manufacturers are today under enormous pressure from Chinese OEMs and vendors, which have rapidly emerged as their principal competitors worldwide. In Thailand, for instance, aggressive sales strategies of Chinese OEMs have eroded Japanese auto sales. Deep-pocketed Chinese automakers follow a linear strategy, hinging on involution-style price wars (neijuan).[120] In the Thai market, this onslaught has forced even large automakers such as Toyota, which is not known for discounting its products, to reduce prices to remain competitive. Companies like Suzuki and Subaru, on the other hand, are altogether ceasing local manufacturing (and will import from India and Japan instead), and smaller Chinese rivals like Next are scaling back.[121],[122]
Chinese automakers also tend to concentrate value capture within Chinese vendor networks, limiting the role of local suppliers in critical segments, raising concerns about job losses and erosion of domestic capability.[123],[124] Notably, Japanese automakers are now seeking to redraw their supply chains to reduce their dependence on China,[125] and India and Thailand are central to this effort. Towards this end, beyond manufacturing, Japanese automakers have made notable investments in capacity building and R&D, which help these economies move up the global automotive value chain and hedge against the disruption posed by Chinese competition.
Thailand and India are also important export hubs for Japanese auto OEMs, though their destination markets largely overlap.[126],[127] Suzuki, Toyota, Honda, and Nissan ship their India-manufactured models to Africa, Latin America, the Middle East, Oceania, Europe, and other Asian markets, including Japan.[128],[129],[130] Japanese auto companies such as Toyota, Isuzu, Honda and Mitsubishi export Thailand-manufactured vehicles to ASEAN, Australia, New Zealand, the Middle East, Africa, Europe, North and South America, China, and Japan.[131]
These dynamics create a strong case for an India-Japan-Thailand automotive trilateral. India’s relatively open vendor ecosystem can integrate Thai suppliers, while shared testing and homologation infrastructure can improve efficiencies. Thailand’s EV ambitions can be reinforced by India's experience in localisation, battery and battery management systems (BMS) engineering, charging ecosystem design, and output from India-based GCCs.[132],[133],[134] India, meanwhile, stands to benefit from Thailand’s component ecosystem and proximity to ASEAN markets. For Indian OEMs, it would mean access to reliable supply chains, efficient component sourcing, and widened access to ASEAN markets. For Indian EV startups and suppliers in particular, plugging into an integrated trilateral ecosystem could open up new opportunities to supply software, telematics, power electronics, and components into global platforms. For Japanese OEMs, an architecture that anchors key platforms and technologies in two large, growing, and politically aligned production bases diversifies risk.
The India–ASEAN FTA (AIFTA),[135] the India-Japan Comprehensive Economic Partnership Agreement (CEPA),[136] the ASEAN–Japan Comprehensive Economic Partnership (AJCEP),[137] and the Japan–Thailand Economic Partnership Agreement (JTEPA)[138] could together provide the legal and tariff framework to underpin the trilateral. However, for this to materialise, addressing tariff-line anomalies, tightening rules of origin to prevent third-country transhipments, and tackling non-tariff barriers are important. The Automotive Trilateral could be a game-changer. It could strengthen the resilience of the Indian, Japanese, and Thai automotive ecosystems, enable the rationalisation of export strategies across common markets, and generate efficiencies beyond what bilateral arrangements alone can deliver.
India aims to become a developed nation by 2047, under its Viksit Bharat 2047 mission. Deeper integration into GVCs is central to this, as sustaining 7–8 percent growth will require much higher productivity, technology absorption, and export-oriented manufacturing and services. However, this requires scaling up and integration of India’s MSMEs into export‑oriented production networks.[139] Worldwide, MSMEs play a central role in integrating their respective economies into GVCs. In Germany, SMEs (the Mittelstand) generate about 55 percent of GDP and around 68 percent of exports, employ a significant share of the workforce, and specialise in high-value niches such as machinery and industrial equipment.[140],[141] In India, as per the Economic Survey 2025–26, MSMEs account for “approximately 35.4 percent of manufacturing, around 48.58 percent of exports, and 31.1 percent of GDP in the country.”[142] MSME exports have risen from INR 3.95 lakh crore (~US$43 billion) in 2020–21 to about INR 12.39 lakh crore (~US$136 billion) in 2024–25,[143] and their export share touched 48.55 percent in FY25.[144]
However, they struggle to match global leaders in cost competitiveness, technology, skills, and quality.[145],[146] On the one hand, inadequate access to affordable finance hampers their ability to modernise and develop the talent pool needed to comply with GVC benchmarks.[147] On the other hand, limited international exposure limits their ability to navigate the maze of international regulatory frameworks.[148] The Indian government has sought to address some of these challenges through Production Linked Incentive (PLI) schemes across 14 sectors; initiatives such as Make in India, Atmanirbhar Bharat, PM Gati Shakti, and the National Logistics Policy; and district-level export hubs.[149],[150] Narrowing the MSME productivity gap, it is argued, could add over 10 percent to India’s GDP[151] and enhance India’s GVC play.[152]
Worldwide, nations have leveraged complementarities in enhancing their GVC play. Mexico’s integration into North American value chains, for instance, has leveraged complementarities with the US.[153],[154] Likewise, several Central and Eastern European economies have utilised alignment with Germany to advance towards sophisticated manufacturing and services within European production networks.[155] For India, few partners match this complementary profile as well as Thailand. MSME collaborations are an important part of the India–Thailand Strategic Partnership roadmap.[156]
Thailand is Southeast Asia’s third-largest economy, with total trade reaching US$684.6 billion in 2025 (a 12.92-percent increase over the previous year), signalling its strong integration into global supply chains.[157] Thailand’s strengths include established ecosystems in automotive, agro-processing, electronics, electrical appliances, and machinery manufacturing with well-developed supply chains, and competitive labour costs.[158] Manufacturing accounts for approximately a quarter of Thailand’s GDP.[159] This builds to a robust foundation. Generations of Thai engineers, technicians, and administrators have benefited from advanced Japanese know-how and training at least since the early 1960s on the back of large Japanese ODA and investments into the country’s manufacturing and farm sectors.[160],[161],[162] This is in line with Japan’s so‑called “wild geese flying pattern of economic development”,[163],[164] which has played a role in East Asian economic development.[165] Notably, for large Japanese manufacturing companies such as Honda, Toyota Motor, Kaga Electronics, and Daikin, Thailand has become a key manufacturing and export hub,[166],[167],[168],[169] including for re‑exports to Japan.
Over time, this has resulted in Thai SMEs progressively moving up the value chain.[170] Notably, the Japanese investment into Thailand has surged over the past few years as they have sought to relocate their manufacturing from China to safer geographies amid the US-China trade standoff.[171]
Over the past decade, Thai manufacturing has shifted towards higher value-added activities. As per OECD Trade in Value Added (TiVA) 2023 data, 35.4 percent of Thailand’s domestic value added by 2020 was driven by final foreign demand above the OECD average of 29.8 percent in the same period.[172] Nearly half of all imported intermediate goods and services are re‑used in exports, especially in automobiles, machinery and basic metals, and services value added accounts for 30.2 percent of manufactured exports. The “Thailand 4.0”[173] strategy launched in 2016[174] seeks to transform the country from a middle-income economy to a high-income innovation-driven economy over two decades by incentivising ten key industrial sectors, five each from what it terms the ‘First S-Curve’ (building on existing strengths) and ‘New S‑curve’ (future growth engines) industries, through generous tax and non‑tax benefits, infrastructure development and targeted support for SMEs. While the first S‑Curve seeks to leverage and build on the country’s current strengths spanning automotive, electronics, medical and wellness tourism, agriculture and biotechnology and food processing, the New S Curve focuses on future growth engines such as robotics and automation, aviation and logistics, biofuels and biochemicals, digital industries, and medicare and allied sectors.
The complementary strengths of Indian MSMEs and Thai SMEs make them natural partners, and cross-leveraging each other’s strengths can catalyse the GVC integration ambitions of both countries. Indian MSMEs in electronics and automation, for instance, could integrate into Thai production ecosystems through task sharing along specific value chains. For instance, design, tooling, and software are among the strengths of Indian MSMEs. Conversely, precision assembly, electronics integration, testing, and certification are areas in which Thai SMEs have established themselves, particularly in automotive, machinery, and electronics. This provides a strong case for a collaborative consortium in sectors like automotive electronics, industrial machinery, and IoT devices. Food processing is another area. India’s food processing sector employs over seven million people and contributes about 7.7 percent of manufacturing gross value added (GVA),[175] but is under-scaled. Thailand has built one of Asia’s most advanced food processing ecosystems,[176] driven by SMEs, with the sector accounting for nearly a quarter of GDP.[177] Thai strengths in clustering, certification and global retail integration could be leveraged by Indian MSMEs seeking deeper insertion into global agri-food value chains. The Memorandum of Understanding (MoU) between the National Small Industries Corporation Ltd. (NSIC) of India and the Office of Small and Medium Enterprises Promotion (OSMEP) of Thailand on MSME cooperation[178] should energise such cooperation.
For Thailand, such a partnership would not only support its transition under the Thailand 4.0 national strategy but also help mitigate risk from overexposure to a predominantly two-country-led manufacturing ecosystem. Moving forward, India and Thailand could establish joint MSME clusters in both countries and facilitate reciprocal access to domestic and foreign markets, strengthening the GVC integration of both countries. Such clusters will also comply with stringent rules of origin requirements in Free Trade Agreements (FTAs), enabling small and medium enterprises on both sides to leverage the extensive web of FTAs both countries have to access a larger global market at lower effective tariffs.[179],[180] India has more than a dozen FTAs and Comprehensive Economic Partnership/Cooperation Agreements (CEPAs/CECAs), with about eight concluded over the last decade and several more under negotiation.[181],[182] Thailand, for its part, has 17 FTAs covering 24 trading partners, participates in the wider ASEAN FTA architecture, and is also negotiating additional agreements.[183] Yet, to truly give wings to such joint collaboration, reducing, and where possible, eliminating tariff and non-tariff barriers are key.
India holds a special place in the Thai imagination, shaped by over two millennia of shared civilisational linkages[184] underpinned by religion, kingship, and ritual. Hinduism and Buddhism have shaped Thai cosmology.[185] Thai monarchs are styled “Rama”, after the central figure of the Hindu epic Ramayana, while the reigning Chakri dynasty draws its name from Vishnu’s Sudarshan Chakra. Royal practices blend Theravada Buddhist ritual with Brahmanical liturgy and sacraments.[186] Today, over 95 percent of Thais adhere to Theravada Buddhism, and religion forms a critical part of national identity.[187] Buddhism is also one of the pillars of official national ideology, the other two being the Nation and the King since the reign of King Vajiravudh (1910-25).[188]
According to a 2022 Pew Research Survey, over 91 percent of Thais identified Buddhism as central to their national identity, and more than a religion, they considered it an ethnicity.[189] Notably, successive amendments to the Thai Constitution over the years have codified this sentiment, granting Buddhism pre-eminence.[190] For Thais, a visit to the four important Buddhist sites of Bodh Gaya, Sarnath, and Kushinagar in India and Lumbini in Nepal is considered an important form of merit-making and purifying the mind.[191] Notably, over 90 percent of Thai inbound visitors to India between 2013 and 2021 came to visit religious sites, primarily Buddhist.[192]
However, with just over 140,000 Thai tourists visiting India in 2024, the arrival numbers do not reflect the true potential.[193] This traces to continuing supply-side constraints. First is the challenge posed by sub-par visitor experiences, especially in terms of infrastructure such as quality stay and food options, public facilities, last-mile connectivity, and avenues for tourist-public interface.[194] This is compounded by the shortage of organised visitor information and facilitation nodes,[195] resulting in illegal touting and other forms of unregulated agency[196] that diminish the visitor experience.
To address these issues, the Indian government, in 2015, launched schemes such as the National Mission on Pilgrimage Rejuvenation and Spiritual Heritage Augmentation Drive (PRASHAD), to improve facilities across key pilgrimage destinations and the Swadesh Darshan scheme to develop theme-based tourist circuits, including religious tourism.[197],[198] Important Buddhist sites such as Bodh Gaya, Sarnath, Kushinagar, Shravasti, Rajgir, and Vaishali are covered under these schemes. Furthermore, to ensure ease of access for tourists, the Indian government has prioritised providing seamless connectivity to these destinations. In October 2021 a new international airport opened at Kushinagar,[199] the final resting place of the Buddha, while the airport at Gaya, where Buddha attained enlightenment, is being expanded and upgraded to meet international standards.[200]
Likewise, the infrastructure at Shravasti Airport, where the Buddha spent most of his time teaching, has been upgraded to accommodate small commercial aircraft.[201] A new airport is also being developed at Rajgir in Nalanda,[202] which will facilitate easy access to the adjoining Buddhist heritage circuit. This is augmented by improved rail and road connectivity, including new multi-lane expressways, which reduce travel time to reach these destinations. However, these initiatives have yet to result in the anticipated increase in tourist footfalls. A coordinated, whole-of-society approach is needed to align incentives for all stakeholders—from transport operators and travel facilitators to traders and local residents. The lack of it has both, led to underutilised assets and failed to motivate stakeholders to actively participate in the process.
The case of the Kushinagar International Airport illustrates the challenge. Inaugurated in 2021 as a flagship gateway for global Buddhist tourism, it suspended scheduled commercial operations in 2023 due to low passenger demand.[203] Shravasti Airport displays a similar trend.[204] While Gaya Airport handles international flights from Bangkok on Thai Airways and Druk Air, these services are priced much higher than those via Delhi or other hubs, which increases travel time and logistics, dampening demand. Thoughtfully calibrated incentivisation is needed to address these challenges. For example, India could consider granting fifth-freedom traffic rights to Thai carriers for their flights mounted to and from Buddhist Circuit airports, allowing them to carry pilgrims between India and third countries that are sources of Buddhist visitors. Buddhist sites receive over 6 percent of all international tourist arrivals in India.[205] India could seek reciprocal fifth-freedom rights for Indian carriers from select airports across the 55 second-tier provinces which Thailand is seeking to put on the global tourist map as part of the ‘Ignite Tourism Thailand’[206] programme, to onwards destinations such as Japan, South Korea, Vietnam, or Australia, and offer these rights as an incentive to Indian carriers operating at Buddhist Circuit airports. Additional incentives could include expanded traffic rights on profitable routes, concessions on airport charges and reduced aviation turbine fuel (ATF) taxes for uplift at circuit airports like Gaya and Kushinagar. Such measures can improve the commercial viability of operating at these airports and consequently increase tourist footfalls.
Community integration is crucial. Local residents must be incorporated into the economic value chain through employment and enterprise development. This includes promoting small businesses that market local produce and handicraft, train and certify local youth as tour guides, tourism information staff, cultural performers, and interpreters, and extending concessional credit to support asset creation, such as taxis, homestays, restaurants, and small hospitality units. Direct economic participation aligns community incentives with outcomes. When local communities have a financial stake in the project, they become invested participants in ensuring a quality visitor experience. A formal oversight mechanism comprising the government, private operators, and community representatives could be instituted to supervise implementation and enforce standards. Further, service standards require strengthening. Law enforcement personnel, municipal authorities, tourism officials, and frontline service staff should be sensitised to ensure a positive visitor experience.
Parallel improvements in core infrastructure, including roads, sanitation, accommodation, and healthcare, are essential to sustaining visitor confidence. In a 2025 survey of Thai visitors to India, more than half of the respondents reported experiencing some form of health threat.[207] Established healthcare providers and hospitality chains should be incentivised to develop high-quality facilities in these locations. India’s digital public infrastructure presents an additional opportunity. Integrating the Thai language into the Bhashini platform, for instance, could enable real-time translation of basic public interfaces; facilitate easier communication with local service providers; and enable Thai language Augmented Reality/Virtual Reality (AR/VR) experiences linked to heritage sites, among others.
Globally, the Buddhist tourism segment is projected to grow at over 15 percent CAGR between 2025 and 2030, exceeding US$80 billion by 2030.[208] To tap into this burgeoning segment, countries such as China and Thailand have embarked on ambitious promotional programmes. China, for instance, is investing in large-scale monastery restorations and festivals around key monasteries and sacred geographies and developing experiential pilgrimage routes complete with themed storytelling, immersive experiences, and local cultural enterprises to attract this segment.[209],[210],[211]
Tourism from India to Thailand is more robust, with over 2 million Indian visitors in 2024.[212] Lower entry barriers (such as the 60-day visa exemption for Indians travelling for leisure and short business trips to Thailand), good connectivity, a choice of products across price and experience segments, and the rising appetite for outbound travel on the back of higher disposable incomes have spurred demand.[213] The weak marketing of India as a destination is arguably a key factor in this asymmetry. Most Thais visiting India are self-motivated, primarily for religious reasons. They are largely composed of middle-aged and older individuals who join Group Inclusive Tours (GITs)[214] with budget itineraries. Apart from lower per capita spending, it also leaves them with little room to experiment with India’s broader offerings. This creates a perpetual shallow-yield trap from which India must break free to attract high-spending Thai tourists seeking superior experiences. As per Visa’s ‘Global Travel Intention Study’ of 2023, the top five motivators in the order of preference for Thais travelling abroad were ‘relaxation’, ‘shopping’, ‘exploring and doing something new’, ‘travelling as a reward’, and ‘adventure’.[215] From wellness and medical tourism to nature and wildlife, culture and heritage to adventure and shopping, India provides an unparalleled range of experiences across a wide price spectrum that appeal to diverse demographics.
Therefore, even as India works to expand the Buddhist tourism trail among Thais, it must also make concerted efforts to tap into a far greater opportunity, first by improving ease of entry. India today grants free e-tourist visas,[216] in addition to fee-based one- and five-year multiple-entry tourist visas,[217] via the standard route to Thai nationals. A liberalised entry regime at par with those of Nepal or Bhutan could help increase inbound tourist numbers and expand the experience basket beyond religious tourism. The surge in tourist arrivals from India to Thailand following the liberalised entry regime for Indians is a case in point.[218]
For India to realise its mission of Viksit Bharat by 2047, it requires reliable partners whose capabilities reinforce its own. Complementarity creates shared stakes. Geopolitical rearrangements over the past decade have forced both sides to look beyond their respective comfort geographies. Approaches, such as India’s Act East and Thailand’s Act West, emanate from this. Few partnerships blend cultural familiarity with such clear alignment of interests and capacities as India and Thailand. Each meets a strategic need for the other.
However, realising this will require moving beyond formulaic approaches and reimagining the very DNA of cooperation. The average Thai has limited exposure to contemporary India and its capabilities. Popular imagination of India is shaped by media narratives, which are often reductive,[219],[220] and mixed pilgrim experiences.[221],[222] The overwhelming share of Thai visitors to India still come for religious purposes, with little diversification in experience. Conversely, for most Indians, Thailand remains primarily a leisure tourism destination. This mutual narrowing of perception traps the two sides in a perpetual low-yield relationship. Leveraging the complementarities identified in this report offers a breakout pathway and will deepen economic integration and people-to-people understanding.
The five sectors discussed—semiconductors, AI, automotives, MSMEs, and tourism—form a spectrum of high-yield, early-harvest collaborative possibilities. However, the larger collaborative canvas far exceeds these five sectors. A long tail of domains, from defence equipment manufacturing[223] and maritime security cooperation to renewable energy, pharmaceuticals, digital financial connectivity and fintech, space and biotechnology, and creative industries and startups,[224],[225],[226] has already been identified by both sides and can be progressively woven into an India–Thailand compact as trust and familiarity deepen.
India also needs to widen its soft franchise in Thailand. Programmes by visiting Indian cultural troupes and food and film festivals are regular, but these engagements need to be deepened. Engaging the Indian diaspora and Thai youth presents the greatest opportunity in this regard. Thailand is home to close to half a million people of Indian origin.[227] They play an important role within the Thai national schema and are India’s greatest cultural ambassadors. Yet for many, settled in Thailand for generations, India remains an inherited notion with no first‑hand interface. India needs to evolve meaningful ways to familiarise them with modern India and tap their agency to strengthen the Indian franchise. Initiatives such as the Government of India’s ‘Know India Programme’,[228] for diaspora youth can be easily adapted to appeal to a larger diasporic demographic. Shorter duration, capsule-course formats and multimodal delivery will expand participation.
Over a quarter of Thailand’s population is 24 years or under,[229] and engaging this demographic is crucial to the franchise-building exercise. Apart from scholarships, fellowships, and a few reserved seats at select Indian universities for Thai students,[230] India supports India Studies Centres across seven Thai universities,[231] and 13 India corners across various universities and institutions.[232] Several Indian universities have also partnered with Thai universities to offer short courses and full-fledged degrees.[233],[234],[235] This engagement needs to be expanded, both in intent and form, to offset any reductive anti-India propaganda peddled by vast and well-resourced information networks of adversarial actors.
China is an instructive study in this regard. It runs 17 Confucius Institutes (CI), including two Maritime Silk Road Confucius Institutes, as well as 11 Confucius school classrooms across Thailand, the densest CI cluster after South Korea.[236] It also supports a large number of China study centres in Thailand’s leading universities, besides university-to-university partnerships.[237],[238] A pillar of Chinese diaspora engagement is the so-called ‘Root Seeking Camps’,[239] which bring hundreds of thousands of young overseas Chinese diaspora to the mainland to familiarise them with China and with flagship economic-political projects such as the Belt and Road Initiative (BRI). Run by state, party, and mass organisations, these camps are explicitly tied into the Chinese Communist Party’s United Front Work (UFW)[240] and ‘nation‑rejuvenation’ agendas. They serve China’s larger economic, political and social goals by advancing the notion of a ‘transnational Chinese nation’ and promoting Chinese interests overseas.[241]
Among ordinary Thais, India’s democratic credentials remain admired, and within its policy community, there is appreciation for the way India conducts its partnerships. The fractured international order presents a rare opening. Thailand seeks strategic diversification and capacity building to move up value chains and reduce external dependencies. India needs reliable partners that can complement its rise and accelerate its journey to becoming an advanced nation. An India–Thailand partnership must build on this goodwill and convergence to create a compact that leverages complementary strengths to build mutual capacity and networks. The long-term purpose, however, must be to strengthen the agency of both sides. Only then will the partnership be sustainable. As the geopolitical window to drive this is open, and the strategic logic is compelling, agility will be key.
Jaibal Naduvath is Vice President, Observer Research Foundation.
All views expressed in this publication are solely those of the author, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.
[a] Rankings are as per the default weights set by the development team.
[b] FAME: Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India
[c] PM E-DRIVE: Prime Minister’s Electric Drive Revolution in Innovative Vehicle Enhancement
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Jaibal is Vice President - ORF Mumbai and Communications of the Observer Research Foundation (ORF), India’s premier think tank. His research focuses on issues of ...
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