NEW DELHI -- India's trade with the 10-member Association of Southeast Asian Nations (ASEAN) currently stands at around $80 billion and could jump by a quarter in 2015.
"We hope by 2015 it will touch $100 billion and [double] by 2022," said Commerce and Industry Minister Nirmala Sitharaman at the second Cambodia, Laos, Myanmar and Vietnam (CLMV) Business Conclave in the Indian capital. "There is lot of work ... a lot of scope."
Sitharaman added that India's old Look East policy aimed at strengthening economic and strategic ties with Southeast Asia has morphed into the new Act East policy. The minister's comments came a month after Prime Minister Narendra Modi addressed an India-ASEAN summit in Myanmar where he expanded upon a new era in India of economic development, industrialization and trade. Externally, said Modi, India's Look East policy had become the Act East policy.
Sitharaman confirmed that India is "very keen" to open up its northeast comprising the states of Arunachal Pradesh, Assam, Meghalaya, Tripura, Mizoram, Sikkim, Manipur and Nagaland.
By opening up the economy and improving eastward connectivity through accelerated infrastructure development, she said the region would serve as the "threshold to our Act East policy". The minister said "commerce, culture and connectivity" are the three pillars for India's engagement with the CLMV group.
A recent joint report by the Federation of Indian Chambers of Commerce and Industry (FICCI) and PricewaterhouseCoopers (PwC) confirmed that India's northeast is naturally rich. With 34% of national water resources, it claims almost 40% of hydro power potential. The region borders Bangladesh, Bhutan, China, Myanmar and Nepal, but remains one of the most undeveloped parts of the country.
The report noted that proposed infrastructure projects such as pan-Asian highways 1 and 2 will pass through India's northeast. "There lies a great opportunity for increasing India's trade with ASEAN and other border countries," the FICCI-PwC report said. It estimated aggregate trade between India and ASEAN, China, Bangladesh, Bhutan and Nepal at about $152 billion last year, and projected $1,000 billion by 2035.
FICCI Secretary General A. Didar Singh described the northeast in the report as an economic corridor connecting India with ASEAN and Bangladesh.
Sitharaman noted that over 70% of India's existing trade with the CLMV countries centres on very small number of goods, and she highlighted the potential for expansion. India's CLMV trade amounted to $13 billion last year, and much of that was with Vietnam.
India signed a free trade agreement on goods with ASEAN in 2009, and another on services and investment is due to come into effect on Jul. 1.
"We are hoping that the complete ratification and adoption of the services and investment agreement between the two sides will give a quantum jump to bilateral trade," Pankaj K. Jha, research director at the Indian Council of World Affairs (ICWA), told the Nikkei Asian Review. "We are really looking for a boost to our economy as the services sector is the biggest contributor to our GDP."
Jha predicts an easing in the movement of skilled labor, and said this will lead to "more cohesive integration" of the economies concerned. According to Jha, Modi's Make in India campaign promoting the country as a manufacturing hub is already speeding up inbound investment including from ASEAN. Singapore is now one of India's largest investors.
He observed that India has been more assertive on the international stage since Modi became prime minister in May. For example, the prime minister called for peaceful resolution of disputes in the South China Sea during visits to Japan and the U.S. "Any disturbance which hampers regional security would have [a] detrimental effect on India's interests also," said Jha.