Economic links integral to India's Act East policy

India and Asean are commemorating 25 years of dialogue partnership this year. Speaking earlier this month at separate events in Delhi and Singapore, India's External Affairs Minister Sushma Swaraj and Foreign Secretary S. Jaishankar publicly reiterated strategic commitment to South-east Asia and Asean as an anchor of India's Act East policy.

Twenty-five years ago, in the wake of a tectonic geopolitical change, India opened its economy to the world and, with instincts honed over centuries of interaction, turned naturally to the East. In turn, Singapore's then Prime Minister Goh Chok Tong led Asean's outreach to India, and so along an ancient route began India's modern reintegration with its East.

Since then, an engagement that began primarily as an economic one has become increasingly strategic in content. With each Asean partner, as also with other major countries and small island states in the wider region, India has developed strong political, economic and defence relations.

It has also become part of Asean-led institutions like East Asia Summit, Asean Regional Forum, ADMM+ and ReCAAP. It has signed free trade agreements with Asean and Thailand, and comprehensive economic partnership agreements with Singapore - fittingly the first one - Japan and Republic of Korea, and is negotiating one with Australia.

India became an eager participant in the Regional Comprehensive Economic Partnership (RCEP) negotiations launched in Phnom Penh in November 2012. This reflected our vision of the Indo-Pacific region as our natural habitat, our desire for closer economic integration with the dynamic East and our strategic commitment to the region.

Since then, and especially over the past three years, India has engaged actively in RCEP negotiations, even as we have set a rapid pace of internal reforms in India. Indian negotiators have approached RCEP with the same intent as their counterparts - with belief in the value of RCEP and the desire to achieve the most comprehensive, fair and balanced agreement. They must, as their counterparts do, reflect political sentiments of a federal democracy, safeguard trade vulnerabilities and maximise gains in areas of strength for India.

India has made an offer on trade in goods that takes into account differing circumstances and existing arrangements with RCEP partners. It, thus, builds on its existing FTAs in the region and, at the same time, addresses sensitivities on its alarming trade deficit with China, the only major country in the RCEP with which it did not already have an FTA.

Since India has higher-than- average normal tariff rates, tariff reductions that India is making are also much higher than others. On the other hand, India's coverage and quality of offer in the service sector is much better than that of other RCEP partners. Most are reluctant to build on their existing FTA commitments or to commit even to their own autonomous levels. Indeed, the asymmetry of ambition between goods and services in the RCEP negotiations is striking.

If RCEP is to be comprehensive, as the name suggests and its principles declare, it must have a balance between goods, services and investments. An ambitious agenda for trade in goods and a modest one for services will make the agreement less than comprehensive. RCEP must also reflect the character of the 21st century economy, in which trade in services and knowledge will be as important - if not more - as trade in goods.

FTAs are ultimately a balance of negotiated interests. They should not be the only test of an economy's openness and its embrace of globalisation. India's commitment to global integration and openness is beyond doubt. Public support for it, as international surveys show, is among the highest in the world. A nation of over 800 million youth knows that their future will be secured not just by the scale of India's economy, but also by the depth of global engagement. Indeed, external trade surged to nearly 50 per cent of India's GDP by 2014, more than in China and the United States.

In the course of the past three years, India has accelerated the momentum and ambition of economic reforms. It is among the most open in the world for foreign investment. Doing business in India is becoming easier by the day, as governance becomes clean, transparent, policy-driven and responsive; processes become simpler and migrate to the digital space; reforms touch every stage of the business cycle from entry to exit; legal compliance becomes easier; infrastructure expansion at an unprecedented scale removes bottlenecks and reduces transaction cost and time; ports and customs become more efficient; and, tax regime and administration more stable.

On July 1, India entered a new era with a goods and services tax, uniting a nation into a single market. This was not just the biggest tax reform in seven decades since Independence, but a reflection of the government's will to pursue transformational reforms and the capacity to unite a highly diverse, federal nation of 29 states behind a common purpose. Many analysts around the world are of the view that India will have the fastest long-term growth rate among all major economies, and return, as early as next year, to above 7.5 per cent, even as macroeconomic stability continues to strengthen.

Rapid growth of a globally integrated economy of 1.25 billion people in South-east Asia's neighbourhood would greatly benefit Asean region. Singapore is already reaping its benefits across a broad range of sectors. Equally, an integrated and dynamic Asean is a priority economic partner for India. Fuelled by political goodwill, proximity, connectivity and existing India-Asean FTA, India's partnership with Asean will accelerate.

But, for India and Asean alike, RCEP promises more. It brings all major regional economies into a single arrangement, which can anchor integration and prosperity in the Indo-Pacific region. It can also turn the tide on anti-globalisation sentiments. For this reason, India looks forward to a fair, balanced and comprehensive RCEP that benefits all participating members. This week, in RCEP talks in Hyderabad, India leads efforts in that direction.

  • The writer is the High Commissioner of India in Singapore.
A version of this article appeared in the print edition of The Straits Times on July 27, 2017, with the headline 'Economic links integral to India's Act East policy'. Print Edition | Subscribe