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India's ASEAN Trade Deficit Widens Amid Underutilization of Free Trade Agreement

Strategic Insights

— 2 min read

India's trade deficit with the ASEAN bloc has significantly widened in FY25, despite the implementation of the ASEAN-India Trade in Goods Agreement (AITIGA) in 2010. AITIGA was intended to provide India's exporters with preferential access to the ASEAN market, but more than half of India's exports to the region are taking place outside the pact's framework, resulting in exporters paying regular import duties instead of availing the lower or zero-duty benefits. The Commerce Department has initiated a review of AITIGA to address operational hurdles, procedural delays, and market challenges that are preventing optimal use of the trade pact.

Key Takeaways:

  • India's exports to ASEAN fell by 5.7% in FY25 to USD 38.96 billion, while imports rose by 5.6% to USD 84.16 billion, resulting in a trade deficit of USD 45.2 billion.
  • The trade deficit has widened significantly since the implementation of AITIGA in 2010, when the deficit stood at just USD 8 billion.
  • More than half of India's exports to ASEAN are taking place outside the pact's framework, resulting in exporters paying regular import duties instead of availing lower or zero-duty benefits.
  • Exporters face operational hurdles, procedural delays, and market challenges, including inconsistent guidance from customs, high documentation costs, and varying interpretations of rules by ASEAN authorities.
  • The Commerce Department has initiated a review of AITIGA to address these issues and take up concerns with ASEAN countries during future negotiations.
  • The review aims to boost trade and reduce the deficit by optimizing the use of the trade pact.

Statistics:

  • India's exports to ASEAN fell by 5.7% in FY25 to USD 38.96 billion (£29.44 billion) [1].
  • India's imports from ASEAN rose by 5.6% in FY25 to USD 84.16 billion (£64.31 billion) [1].
  • The trade deficit between India and ASEAN stood at USD 45.2 billion (£34.57 billion) in FY25 [1].
  • AITIGA was implemented in 2010 with the aim of providing India's exporters with preferential access to the ASEAN market [2].
  • In contrast, the trade deficit between India and ASEAN stood at just USD 8 billion (£6.13 billion) when AITIGA was implemented [2].
  • The review of AITIGA aims to understand and address operational hurdles, procedural delays, and market challenges faced by exporters.

Sources:

  • [1] "India's exports to ASEAN fall 5.7% in FY25, trade deficit widens" by HT Digital Content Services with permission from KNN (Knowledge & News Network).
  • [2] "ASEAN-India Trade in Goods Agreement (AITIGA)" by various sources, including the Indian Commerce Department and ASEAN authorities.

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