India’s Act East Policy (The Hindu)

Mains Paper 2 : International Relations
Prelims level : Act East Policy
Mains level : Importance is East and Southeast Asia for India

Context

•  Prime Minister Narendra Modi, who left for Bangkok on 2nd November, said 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 there.

Background:

•  PM Modi is in Bangkok to participate in the 16th ASEAN-India Summit on November 3.
•  He will also attend the 14th East Asia Summit and the 3rd Summit meeting of nations negotiating a Regional Comprehensive Economic Partnership (RCEP) agreement on November 4.

Significance:

•  In his departure statement, Prime Minister said ASEAN related Summits are key elements of India’s foreign policy, most notably our Act East Policy.
•  Highlighting the importance of East Asia Summit, Prime Minister said it gives an opportunity to present our vision for the Indo-Pacific region. The Prime Minister added that during the visit, he will also hold bilateral meetings with a number of other world leaders present in the Thai capital for related summit meetings.

What importance is East and Southeast Asia for India?

•  Since 50s India is active in this area and took fillip in 1992 when PV Narasimha Rao became the Prime Minister and he initiated the ‘Look East Policy’.
•  In 1994 India joined ASEAN as a member of the forum and we continued with being
  part of East Asia summits.
•  The region is mainly of India’s interest cause of trade which is approximately $600 million and is mounting onwards.
•  Security is also a major dimension in this policy as securing Indo-Pacific region and securing India’s status in the Indian Ocean region is equally important for us.

What is the History behind?

•  There has been imbalance historically but has progressed in time with the 10 ASEAN Countries which were 6 when we launched the Look East policy in 1992. The bilateral trade was about $2 billion.
•  After the negotiations of free trade area in 2003 the trade was $12 billion which was progressively compounded rate of growth was around 12%.
•  From 2003-2010, when we finalized the FTA in goods the trade had increased very significantly.
•  By 2012 when we marked the 20th anniversary as a dialogue partner with the ASEAN and 10th anniversary as the summit relationship our trade had grown to $72 billion that means there was an annual progression of around 23% from 2003.

What are the issues related?

•  The trade balance with ASEAN is a major concern as we had trade balance of $8 billion in 2012-13 when we signed FTA in goods which today is in the tune of $22 billion.
•  The $107 billion out of the total global trade deficit of India which is in the tune of $180 billion is a huge number.
•  The FTA with China will increase the trade deficit as without FTA itself we have a trade deficit of $55-70 billion that simply means we are throwing out our doors open to cheap low quality Chinese goods coming into the country.
•  If in the area of steel, where China has 50% of global capacity or textile or pharma or plastic or aluminum or chemicals the trade with China is a matter of concern to Indian companies and manufacturers.
•  It is also a concern for dairy products as signing RCEP will allow dairy products from Australia hit the local farmers badly.

Why RCEP is significant?

•  India is on anonymous interest of ASEAN countries for its huge market since the inception of RCEP.
•  It is also the interest of India to connect with these countries not only for trade and commerce but for the 4 pillars/ 4 Cs - Connectivity, Culture, Commerce and Capacity Building.

Way forward

•  Reducing trade deficit with 16 ASEAN members through RCEP in a macro level. Getting positive response for services and skilled labour movement which should be free and fair to reduce the trade deficit.
•  Making Indian goods and prices competitive to face the challenges of cheap imports.
•  To make changes in domestic policy to make business more easily comparatively.
•  Use for full potential the informal meetings to work out trade deals like the Mamallapuram informal meeting between India and China.
•  India has to look at the entire region very carefully to play a significant role and counter Chinese influence.
• Look at the niche areas of India’s interests like civilizational, cultural like the Cholas empire in the 10th century, support for India’s independence, shift from interstate to inter social linkages etc.
•  Integrate the North east states for better connectivity with the ASEAN region.

Conclusion

•  With one year time for signature procedures for RCEP, India as well as ASEAN have ample amount of time to accommodate the demands of all .
•  With India seeing success in West Asia, it should be more conscious and geographically construct its relations between the ASEAN nations to counter the China wave.

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Prelims Questions:

Q1. Red and Yellow soils are generally rich in,
1. Nitrogen
2. Phosphorous
3. Humus

Select the correct answer using the codes given below:
a) 1 Only
b) 1 and 2 Only
c) 3 Only
d) None of the above

Answer: D
Mains Questions:
Q1. What importance is East and Southeast Asia for India? Why RCEP is significant?