FTA review between ASEAN and India can unlock potential for automotive sector, says GlobalData

Following the news that ASEAN countries have agreed to review the ASEAN India trade in Goods Agreement (AITIGA);

Bakar Sadik Agwan, Senior Automotive Consultant at GlobalData, a leading research and consulting company, offers his view:

“India’s trade deficit with the ASEAN countries increased to US$ 23.88bn in the FY2020.  Key reasons stated behind the increasing trade deficit between the partner nations is the existing anomalies in goods tariff, non-tariff barriers and other factors that refrain Indian exporters from competing in their full strength with counterparts such as China. This warranted immediate review of the pact so as to make it more friendly and mutually beneficial for India and ASEAN. The review of free trade agreement (FTA) is expected to unlock new opportunities for India and ASEAN, and could act as a significant growth catalyser for the Indian economy, especially in the post-COVID scenario.

“Petroleum products, meat and edible oil, organic chemicals, and iron and steel are the top export items to the ASEAN economies, and commodities such as pharmaceutical and automotive products (including CBU vehicles and auto parts) present significant export opportunities in the region. However, Indian vehicle and automotive part exports to ASEAN has remained subdued due to the exiting irregularities in tariffs and various non-tariff barriers. For instance, import duty on a Japanese two-wheeler in Thailand and Indonesia is 5%, while India, a global leader in two-wheeler market, witnesses an import duty of 35% on CBU two-wheeler exports. Same stands for CBU exports of passenger cars in Thailand and Indonesia.

“The government has emphasised to review the ‘Rules of Origin’ so as to refrain misuse of the pact by the non-member countries. This will help India to cut-down on its imports from China, which are indirectly routed through ASEAN countries. The review, if done soon, is expected to provide a better market access to Indian automotive sector and support government to achieve its target of US$300bn trade with the ASEAN countries by 2025.”

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