India pushes for Asean FTA update on trade gap

livemint.com:

NEW DELHI : India has initiated talks with the Association of Southeast Asian Nations (Asean) to address concerns over the rules of origin and trade imbalance. The move is part of ongoing efforts to renegotiate the trade agreement following a significant increase in the trade deficit with the 10-member block. In FY23 alone, the trade gap ballooned by 70% to reach $43 billion, according to a government official familiar with the matter.

The widening trade deficit with Asean countries comes amid the bloc’s growing export and manufacturing capacity. Multinational corporations have been investing in Asean as part of their China-plus-one policy. Besides, the implementation of the production-linked incentive schemes has fuelled demand for intermediate products in India.

The trade deficit with Asean was at $21.85 billion in FY19. Experts said while India mostly imports capital goods, raw materials and intermediates from Asean, the tariff concessions under the free trade agreements (FTAs) have also been advantageous to many sectors and adversely impacted domestic companies, especially chemicals and metals manufacturers. “The discussions had stalled earlier, given the difficulties in getting the 10-member nations to the negotiating table.

But the talks are now picking up pace. Both sides had preliminary meetings to renegotiate the terms, and many small working groups have been set up to examine specific issues and demands from both sides," the official cited above said, seeking anonymity. India has taken up issues such as rules of origin, he said.