Balancing the scales

Indian lawmakers bemoan trade deficit with Asean and say the government must do more to lift exports and press Asean to reduce barriers.

Concerned about India's continuing trade deficit with Asean, parliamentarians are pressing the Delhi government to do more to lift exports and correct the imbalance.

They complain that tariff and non-tariff barriers imposed by some Asean countries are affecting Indian exports of agricultural products and leather, as well as the country's huge pharmaceutical sector.

The lawmakers have issued a wide-ranging series of recommendations that also touch on the steel industry, transport links, energy exports and other aspects of deeper India-Asean cooperation.

The standing committee of lawmakers from the upper and lower houses of Parliament made its recommendations in a 151-page report submitted to Vice President M Venkaiah Naidu, who is also the ex-officio chairman of the Rajya Sabha, the upper house.

The committee, chaired by ruling party lawmaker Bhupender Yadav, said that agreements on trade in goods, services and investment between New Delhi and Asean have not yielded the expected benefits to Indian exporters. It also wants a review of the existing trade policy framework with Indonesia, India's largest trading partner in the 10-country bloc.

Bilateral trade between India and Asean was worth US$71.69 billion in the 2017 fiscal year that ended on March 31. The trade deficit of $9.56 billion was an improvement from $14.75 billion in fiscal 2016 and $12.9 billion the previous year, but it remains a big concern of the Indian government.

The trade deficit in the last two years has been driven mainly by imports from Malaysia, Thailand, Indonesia, Brunei and Laos, data from the Director General of Commercial Intelligence & Statistics show.

India imports vegetable oils, coal, crude petroleum, consumer electronics, ships and electronic components from Asean. The latter imports buffalo meat, petroleum products, marine products, iron and steel, spices, copper and copper products from India.

The committee's report notes that the Indian processed foods, rubber, coffee and pepper industries have suffered on account of cheaper imports of these products from Asean. It wants the Department of Commerce to fix appropriate quality norms for such imports, offer more incentives to local industries, incorporate a "livelihood clause" to protect producers, and study safeguard provisions against low-priced imports.

India's strategically vital software and services industry has also experienced problems. The National Association of Software and Services Companies (Nasscom) told committee members in a meeting that authorities in Singapore were either delaying the issuance of visas to Indian professionals or rejecting such requests.

The report attributes the decline in exports of agricultural commodities to the imposition of tariff and non-tariff barriers by Asean members. Non-tariff barriers are also impeding Indian exports of pharmaceuticals, it said.

It notes, for example, that Thailand imposes a 50% tariff on buffalo meat and 30% on edible offal, while in other Asean member countries the tariffs range from zero to 10%.

Committee members criticised Asean members for allowing imports of finished leather, footwear and footwear components, blanched peanuts, tea and steel from China at much lower rates that those offered to India. It wants the Indian government to demand parity.

The report notes that finished leather and footwear components from China can enter Thailand and Vietnam tariff-free. Similar products from India face a 7.5% tariff and the timeline for reducing that rate is "quite long", it said. Similarly, in Thailand, a tariff reduction to 5% will not take place until January 2019.

The committee also wants the Department of Commerce to "actively engage" Asean to seek a better tariff structure for steel exports from India. In comparison to Japan and China, which each have a 19% share of steel imports to Asean, Indian steel has a share of only three percent.

New Delhi exports as well as imports steel from Asean. Its exports have risen from 884,000 tonnes in fiscal 2013 to 1.98 million tonnes in fiscal 2017. Yet the committee complains that the tariff rates offered by Asean members on steel are not in line with the sweeping market access India gives them. "We should seek reciprocity and faster elimination of tariffs from all the major Asean countries including the Philippines, Thailand, Vietnam, Indonesia and Malaysia," the report notes.

The committee also wants the Indian government to expand petroleum exploration and production activities in Asean countries. Currently, India is involved in exploration in Vietnam and Myanmar. The report claims that the Indian petrochemical industry is made to suffer on account of rules of origin requirements.

As well, the committee wants the Narendra Modi government to increase production of hydroelectricity in the northeastern region of the country and supply the surplus energy to Asean nations. India ranks fifth in terms of exploitable hydropower potential in the world.

On the transport and logistics front, the report recommends that the government increase the pace of work on the India-Myanmar-Thailand (IMT) trilateral highway and the Kaladan Multimodal Transport Transit Project (KMTTP).

The trilateral highway linking Moreh in Manipur with Mae Sot district in Thailand via Myanmar is scheduled to be completed by 2019. The committee says extension of the road to Cambodia, Laos and Vietnam "would be highly beneficial in facilitating trade and promoting production networks".

The KMTTP, a road and shipping transport network from Mizoram to Sittwe (Myanmar) and Haldia (West Bengal), is in the final stages of the completion.

India signed a goods trade agreement with Asean on Aug 13, 2009. Agreements on trade of services and investments were signed in November 2014. However, Cambodia and Indonesia have still not ratified the last two agreements while Laos is yet to ratify the agreement on investments.


Recommendations to the Indian government from a legislative committee looking into trade with Southeast Asia:

Build new shipping routes as the Strait of Malacca is heavily congested

Do more to promote the Mekong-India Economic Corridor

Develop a transport and transit hub for trade with Asean in central Assam

Reopen the WWII-era Stilwell Road connecting Assam with Myanmar and China for trade, commercial activities and tourism

Simplify and reform India's debt capital market

Open a university dedicated to teaching and propagation of the Pali language

Facilitate regular interaction through CEO Forums from India and Asean

Allow consulates, cultural and education centres of Asean countries in northeastern Indian states. Relax visa requirements

Explore the possibility of leather exports to Laos, Myanmar, the Philippines and Cambodia where they are negligible

Encourage Indian banks to establish branches or representative offices in Asean states independently or in collaboration with domestic banks

Press Myanmar to move forward with the stalled India-Myanmar-Thailand Motor Vehicle Agreement


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