India’s Act East Policy

Context

  • Prime Minister mentioned India will consider whether its concerns and interests in trade in goods, services, and investments are being fully accommodated when he attends the meeting of the RCEP in Bangkok. 

Act East policy

  • The focus of the Act East policy, which began as a “Look East policy” — that was launched by the former Prime Minister PV Narasimha Rao in 1991 — was to shift the country’s trading focus from the west and neighbour to the booming South East Asian countries.
  • Apart from ASEAN, ASEAN Regional Forum (ARF), East Asia Summit (EAS), Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), Asia Cooperation Dialogue (ACD), Mekong Ganga Cooperation (MGC), Indian Ocean Rim Association (IORA) and RCEP are part of India’s Act East Policy.
What is India’s Act East Policy
  • India’s Act East Policy was unveiled at the 12th ASEAN-India Summit in 2014 held in Nay Pyi Taw which focuses on the extended neighbourhood in the Asia-Pacific region. 
  • The policy which was originally conceived as an economic initiative has gained political, strategic and cultural dimensions including establishment of institutional mechanisms for dialogue and cooperation.
  • India has upgraded its relations to a strategic partnership with Indonesia, Vietnam, Malaysia, Japan, Republic of Korea (ROK), Australia, Singapore and Association of Southeast Asian Nations (ASEAN) and forged close ties with all countries in the Asia-Pacific region. 
  • Act East Policy has placed emphasis on India-ASEAN cooperation in India’s domestic agenda on infrastructure, manufacturing, trade, skills, urban renewal, smart cities, Make in India and other initiatives.
Objectives of “Act East Policy”?
  • The Objective of ”Act East Policy” is to promote economic cooperation, cultural ties and develop a strategic relationship with countries in the Asia-Pacific region through continuous engagement at bilateral, regional and multilateral levels.
  • The North East of India has been a priority in Act East Policy (AEP). AEP provides an interface between North East India including the state of Arunachal Pradesh and the ASEAN region.
  • Various plans at bilateral and regional levels include steady efforts to develop and strengthen connectivity of Northeast with the ASEAN region through trade, culture, people-to-people contacts and physical infrastructure (road, airport, telecommunication, power, etc.). 
  • Closer cooperation in combating terrorism, collaborating for peace and stability in the region and promotion of maritime security based on international norms and laws are being pursued.
How East Asia and South East Asia is important for India?
  • Economic relations with Southeast Asia formed an important component of India’s overall pattern of economic transactions with the outside world. 
  • ASEAN is India’s fourth largest trading partner. India’s trade with ASEAN stands at US$ 81.33 billion, which is approx. 10.6% of India’s overall trade.
  • East and Southeast Asian countries have been important for India in tackling the China which is a major power in Asia.
  • People to People connect: Millions of Indian workers work in East Asia and Southeast Asian countries.
  • Counter-terrorism: by sharing best practices and information, law enforcement and capacity building (under existing ASEAN-led mechanisms).
  • Cyber-security capacity building, policy coordination and CBMs, including by implementing the ASEAN Cyber security Cooperation Strategy and ARF Work Plan on Security of and in the Use of Information and Communication Technologies.
  • Maritime Cooperation between India and this region takes place via existing ASEAN-led mechanisms like the Expanded ASEAN Maritime Forum (EAMF) for the purpose of better coordination in search and rescue, to prevent and manage accidents/incidents at sea in accordance with ICAO and IMO guidelines.
  • India has always considered Southeast Asia as a region of high economic and strategic priority. From Pandit Jawaharlal Nehru and K.M. Panikkar’s writings to India’s Maritime Doctrine – all refer to the significance of the region for India. 
What are some key issues of India regarding the Regional Comprehensive Economic Partnership (RCEP)?
  • Given that India already has existing FTAs with all the 14 members, sans China, the trade agreement would mean having a pseudo-FTA with China.
  • India’s concerns stem from the fact that it already has a bilateral trade deficit of over $50 billion with China. 
  • While RCEP again is fine with a limited number of such items, India’s demand is to apply the tariff differential to all items not offered to China.
  • The deal has been facing increasing resistance from the Indian industry, farmer groups, civil society organizations, and opposition political parties, who apprehend China, will dump cheaper goods in India using the RCEP deal.
  • While the bone of contention for India in the RCEP is largely revolving around tariffs with China, there is also a wider issue of non-tariff measures (NTMs) which needs to be recognised.
  • India has its own structural issues and its manufacturing is not competitive as compared to RCEP members.

India’s trade deficit

  • India’s trade deficit in the year 2019 with ASEAN is around 21 to 22 billion USD. 
  • India ran a merchandise trade deficit with 11 out of the 15 other RCEP members in 2018-19 totaling $107.28 billion.
  • India’s overall merchandise trade deficit was $184 billion in 2018-19.

Way Forward

  • Efficient export: India needs to galvanize the local economy of this region by making its own manufacturing more competitive.
  • Negotiations to reduce trade deficit for more stronger and sustainable economic ties.
  • Make People to people connection strong. The northeastern part of India can act as a gateway to South East Asia.