India and ASEAN: Market Overview

India began formal engagement with ASEAN in 1992. The ASEAN India Framework Agreement on Comprehensive Economic Cooperation was finalized in 2003, resulting in one of the world’s largest free trade agreements (FTAs). Under the Agreement, ASEAN member states and India agreed to open their respective markets by progressively reducing and eliminating duties on 76.4% coverage of goods.

ASEAN brings together ten Southeast Asian countries – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. It has been crucial to India’s Act East Policy (AEP), in shaping the Indo-Pacific architecture.

Market overview

• ASEAN–India Free Trade Area (AIFTA) eliminates tariffs for 75% of goods traded between ASEAN and India. For a further 10% of product lines, AIFTA commits parties to reduce tariffs below 5%.
• AIFTAallows for back-to-back shipment of goods within member countries: AIFTA originating goods brought from member countries enjoy tariff concessions. Originating products passing through Parties can also retain their originating status.
• The AIFTA agreement has seen tariffs eliminated for 90% of products traded between the two regions, including products like palm oil, pepper, tea, and coffee.
• Economic co-operation activities under the AIFTA are undertaken in agriculture, fisheries and forestry; services; mining and energy; science and technology; transport and infrastructure; manufacturing; human resource development; and other sectors such as handicrafts, small and medium enterprises (SMEs), competition policy, Mekong Basin Development, intellectual property rights, and government procurement.
• India has set an ambitious export shipment target of USD 450-500 billion by 2023, against USD 291 billion in 2021.
• India’s merchandise export in January 2022 was USD 34.06 billion, an increase of 23.69% over USD 27.54 billion in January 2021 and an increase of 31.75% over USD 25.85 billion in January 2020.
• India’s merchandise import in January 2022 was USD 52.01 billion, an increase of 23.74% over USD 42.03 billion in January 2021 and an increase of 26.38% over USD 41.15 billion in January 2020.

Top imports for ASEAN countries

Country	Top products	Sectors contributing to increase in demand for import
Malaysia	•    Wood and wood products •    Other crops •    Wearing apparel •    Mineral products •    Textiles •    Food products •    Textiles •    Services •    Wearing apparel, textiles
Singapore	•    Beverages and tobacco •    Rice •    Other crops •    Metals •    Chemicals •    Other crops •    Services •    Metals •    Machinery •    Equipment •    Other manufacturing
Thailand	•    Meat and meat products •    Wearing apparel •    Wheat •    Food products •    Vegetables and fruit •    Meat and meat product •    Leather product
Cambodia	•    Other manufactured products •    Dairy products •    Leather •    Wearing apparel •    Wood and wood products •    Apparels •    Manufacturing •    Services •    Leather •    Food
Indonesia	•    Motor vehicle products •    Wood and wood products •    Meat and meat products •    Other manufactured products •    Paper and paper products •    Services •    Electric equipment •    Chemicals •    Paper
Lao PDR	•    Textiles •    Chemicals •    Electrical equipment •    Machinery equipment •    Mineral products
Myanmar	•    Wearing apparel •    Textiles •    Meat and meat products •    Leather and leather products •    Metals •    Services •    Manufacturing
Philippines	•    Transport equipment •    Wearing apparel •    Wood and wood products •    Other manufactured products •    Chemicals •    CGDS •    Services •    Metals •    Chemicals •    Textiles
Vietnam	•    Wearing apparel •    Meat and meat products •    Other manufactured products •    Vegetables and fruit •    Food products •    Apparels •    Services •    Electricals •    Manufacturing •    Food products
Rest of ASEAN	•    Machinery •    Other crops •    Leather and leather products •    Other manufacturing •    Chemicals •    CGDS •    Machinery •    Services •    Manufacturing

Sectoral Opportunities

Healthcare

• India’s multi-billion-dollar pharmaceutical industry has become a reliable supplier of equipment, drugs, and vaccines to ASEAN countries. India’s healthcare sector can capture some of the 11 million global medical consumers traveling to Southeast Asia for treatment.
• Indonesians alone spent over USD1 billion in medical treatment abroad before the pandemic, mainly in Malaysia and Singapore.
• Major markets such as Indonesia and the Philippines have succeeded in providing universal healthcare.
• Singapore, Thailand and Malaysia provide an advanced level of healthcare for their citizens from neurological procedures to establishing specialized treatment such as heart transplants.

Customs Tariff of India 2022

Description of good	Unit	Standard rate of duty
Machinery for manufacture of chemical& Pharmaceutical goods	u	7.5%
Spectacle lenses of other materials	u	10%
ENT precision instruments	u	7.5%
Acupuncture apparatus	u	5%

Electronic

• The Govt. of India notification under Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR, 2020) has been helpful in sensitizing importers that when they are utilizing the benefits of an FTA, they ought to convince themselves that the prescribed rules of origin are getting fulfilled.
• Major imports to India come from five ASEAN countries — Indonesia, Malaysia, Thailand, Singapore, and Vietnam.
• The ASEAN FTA allows imports of most items at zero or concessional basic customs duty from the 10-nation bloc. Under CAROTAR, partners get the benefit of eliminating tariffs and some non-tariff barriers and easier market access to one another's countries.

Customs Tariff of India 2022

Description of good	Unit	Standard rate of duty
For dry-etching patterns on semiconductor material	u	free
Polishing and buffing machines	u	7.5%
Electronic calculators capable of operation withoutan external source of electric power and pocket-size data recording, reproducing and displaying machines with calculating functions	u	free
Machines for mixing mineral substances withbitumen	u	7.5%

e-Commerce

• India’s e-Commerce sector is expected to be the second-largest e-Commerce market in the world by 2034. By 2024, the sector will be worth USD 99 billion with groceries and apparel serving as key drivers.
• The Govt. of India allows 100% FDI for B2B e-Commerce and 100% FDI under the automatic route for the marketplace e-Commerce model.
• The role played by Indian start-ups and technology-driven innovations facilitating digital payments, hyper-local logistics, digital advertisements, and analytics-driven customer engagement will be expected to increase export revenues and create better products and services in the long term.

Customs Tariff of India 2022

Description of good	Unit	Standard rate of duty
PLCC equipment	u	free
Modems (modulators-demodulators)	u	free
Digital loop carrier system (DLC)	u	free
Synchronous digital hierarchy system (SDH)	u	free

If you want us to assist you with business & trade related concerns in the region, you can write to us at info@iloconsulting.in