India has formally signed an eagerly anticipated free trade pact in services and investments with the 10-nation ASEAN bloc. The FTA, signed in New Delhi on 8 September, is aimed at boosting cross-board investment and allowing freer movement of professionals.
The agreement covers an array of issues and variously encompasses transparency, domestic regulations, recognition, market access, national treatment, increasing participation of developing countries, joint committee on services, review, dispute settlement and denial of benefits.
Although negotiations for the deal started in 2005 and were formally concluded in 2012, internal ministerial squabbling in India and resistance from certain states within ASEAN itself resulted in delays.
Opposition was particularly strong from Thailand, Indonesia and the Philippines.
India has been wary of FTAs with ASEAN since largely losing out on a pact for goods signed with the 10 member bloc in 2009. Despite an increase in imports from ASEAN member states, it was widely felt that India’s rise in exports had been relatively insignificant due to already lower tariffs in the region.
However, with services and investment undeniably India’s strong suit, this deal is sure to reduce India’s trade deficit. Freer movement of professionals, particularly chartered accountants and those of the IT/ITeS sector, will be of distinct benefit to India as well.
With the exception of the Philippines – which remains somewhat cautious of opening up its services sector to Asia’s third largest economy – all member states of ASEAN have now ratified the agreement.
However, according to an official, the Philippines will also sign upon completing the relevant domestic procedures.
The effects of the FTA will be far-reaching. When combined with the 2009 agreement in goods, the pacts in services and investments will become a comprehensive economic partnership between India and the 10-nation ASEAN bloc.
This should help the two rapidly growing economies reach their target of US$100 billion in trade by 2015 (up from US$76 billion in 2012-13), and will further aid the lifting of import tariffs on more than 80% of traded products by 2016.