ASEAN to ink FTA with India by Dec

Indian Prime Minister Manmohan Singh announced at the 11th Annual India-ASEAN Summit his country's readiness to sign an ASEAN-India FTA in services and investment by December 2013. If all goes as planned, the FTA will take effect in July 2014. India's dedication to the region was further emphasized by Singh's plan to open a dedicated mission and appoint a full-time ambassador to the ASEAN Secretariat in Jakarta.

An India-ASEAN FTA in goods has existed since 2010, amounting to more than US$80 billion. This additional services and investment FTA is estimated to increase total annual trade to surpass $100 billion in the coming years.

A services and investment FTA will help India rebalance its growing trade deficit with its ASEAN trade partners. India's weaker manufacturing sector has led to large import volumes in goods from ASEAN nations. ASEAN exports were valued at $43.84 billion, while Indian imports into ASEAN only reached $27.72 billion in 2012.

This new FTA will provide the services industry, including business professionals, consultants and contractual workers, with easier access to growing Southeast Asian markets, particularly Singapore, Malaysia and Indonesia. In 2011, India's services sector made up about 58% of its GDP, according to a joint report by Deloitte and the Indian Chambers of Commerce and Industry.

The joint study revealed that compared to ASEAN nations, India has a greater comparative advantage in the services sector. India's leading position in the global IT sector will also experience significant growth from this FTA.

From a geopolitical perspective, ASEAN has much to gain from further Indian trade and cooperation. China is becoming the major powerhouse in the ASEAN region, with a recently announced goal to increase China-ASEAN trade to $1 trillion by 2020 (from $320 billion in 2012).

India, as a major trade partner, can help ASEAN nations avoid overdependence on Chinese investment and support.