Abstract
India and the Association of Southeast Asian Nations’ (ASEAN) partnership began in the early 1990s mainly in the economic domain. Reeling from a major internal crisis, India wanted to tap onto the region’s economic vibrancy to strengthen its own waning economy. Since then, amidst India’s domestic constraints, economic ties have largely sustained the India–ASEAN partnership on a steady course. India’s withdrawal from the ASEAN-led Regional Comprehensive Economic Partnership (RCEP) negotiations in 2019, therefore, was an important inflection point in the partnership. This study, hence, discusses the prospects for the India–ASEAN partnership moving forward beyond the RCEP. This is undertaken by first examining the main challenges India faces with the ASEAN Free Trade Arrangement and the RCEP. After which, relevant developments pertaining to India’s multilateral partnership within the Indo-Pacific theatre as well as to India’s economic trajectory are deliberated in relation to ASEAN. Based on this analysis, this study argues that the outlook for India–ASEAN ties remains optimistic since the external and internal pressures needed for important economic reforms has not diminished for India. In addition, there are prospects for wider engagements with ASEAN due to Indo-Pacific-related strategic recalibrations in the region. Therefore, collectively these factors will provide crucial thrusts for the partnership to move forward strongly sans RCEP.
Introduction
As India opened up to the world in response to a national crisis that almost collapsed its economy in 1991, 1 It saw the need to draw closer to the Southeast Asian economies. In the region were fast developing economies with the potential of being beneficial partners to India. The members of the Association of Southeast Asian Nations (ASEAN) who were open to foreign investment attracted multinational corporations mainly from Japan, the United States of America, the United Kingdom as well as South Korea who in turn set out to avail themselves to the profits of a regionally integrated production network with lower cost (Nancy et al., 1993). The potential for a mutually advantageous India–ASEAN partnership was high. However, for India, striking the right balance between protecting its domestic economy and raising its economic stature remains a challenge in the partnership.
In this regard, the ASEAN–India Trade in Goods Agreement (AITIGA) which came into force in 2010, in particular, had left India discontented over the lack of mutual benefits that free trade brought to the country. Ultimately, this dissatisfaction led to India’s withdrawal from the Regional Comprehensive and Economic Partnership (RCEP) negotiations in November 2019 (ASEAN, 2019a). The withdrawal came after assessing the ‘fairness and balance’ and the potential impact of the agreement on the ‘lives and livelihoods’ of all Indians. According to India’s Prime Minister (PM) Narendra Modi, the agreement as it stood failed to address India’s outstanding concerns and issues satisfactorily (MEA, 2019a; Mohan, 2019). India faced opposition from its domestic industry and dairy farmers who were worried about the possible influx of Chinese goods as well as the flooding of agriculture and dairy goods from Japan, Australia and New Zealand into the domestic market (The Economic Times, 2019a). Mainly, the possibility of ASEAN being used to export Chinese goods formed the crux of the concerns for India (Gaur, 2020; Saraswat et al., 2018). This was because at least half of the country’s huge trade deficit, according to NITI Aayog, the Indian government’s think tank, was caused by China’s export (Saraswat et al., 2018). India’s trade deficit for the fiscal year 2018–2019 stood at US$21.85 billion with ASEAN and at US$53 billion with China (Marjani, 2019; MCI, 2019). As such, although the RCEP had strategic importance for India, it lacked sufficient economic merits (The Economic Times, 2019b). The 2020 RCEP agreement if with India, would have formed a huge chunk of the free trade area encompassing almost half the world’s population, and 40% of the world’s gross domestic product (GDP) (ASEAN, 2019c).
India’s absence from the RCEP also marked a setback in the country’s efforts for closer regional economic integration. As such, the main puzzle this study attempts to address is whether the India–ASEAN partnership will be weakened without RCEP. This analysis is undertaken from the political economy conceptual framework whereby domestic and international economic factors are considered to better understand their role in India’s pursuit of power in a multipolar world. A state is only as powerful as its ability to acquire resources and extract its resources. The state’s ability to extract its resources is dependent upon many domestic factors including its institutional make-up and state–society relations (Rose, 1998). However, in an increasingly globalised world, with interconnected economies, no state can be completely removed from the global market forces, and therefore a state also has to assess how any disruption in external economic ties would impact the state’s reserves and material strength. This leaves the state having to manage its economic imperatives by both balancing domestic and external forces in order to achieve its national security goals (Cappella Zielinski et al., 2020). In the post-Cold War period, regional economic partnerships such as free trade arrangements have created an environment of trade interdependence among member countries (WTO, n.d.). However, in order to reap the benefits, the domestic economy has to be liberalised to face global market forces. In India’s case, this has been a major challenge, especially with its ties with ASEAN. Nevertheless, India is also a part of other emerging multilateral partnerships within the Indo-Pacific geopolitical framework, a network of like-minded states working towards regional prosperity and security. The aim of this study, therefore, is mainly to examine how other external dynamics beyond RCEP, such as those arising from the Indo-Pacific partnerships, could support India’s economic reforms and India’s partnership with ASEAN.
Therefore, in the first section of this study, the context of India’s economic challenges, mainly in relation to its partnership with ASEAN, are discussed. In the subsequent section, the emerging initiatives within the Indo-Pacific that are relevant to India are assessed. Then finally, based on the juxtaposition as well as on specific internal developments in India, factors important to the strengthening of the India–ASEAN partnership sans the RCEP are deliberated. In so doing, this study hopes to further contribute to the existing literature on the India–ASEAN partnership, by highlighting the emerging nexus between strategic and economic imperatives within the ties, which are more commonly examined separately.
India–ASEAN Partnership: Economic Ties in Primacy
India’s Look East Policy (LEP) took shape in the early 1990s in line with the reforms introduced in 1991 that forced India to embrace liberalisation in a more substantive and sustained manner (Wadhva, 2000). The LEP formalised India’s engagement with ASEAN which was primarily driven by the booming economic growth of the Southeast Asian economies. The World Bank identified East Asia as the region that grew the fastest in the world for the period between 1965 and 1990. The ASEAN member states of Singapore, Indonesia, Malaysia and Thailand were among the eight high performing Asian economies with ‘miraculous growth’ (Nancy et al., 1993). A decade after formalising ties with ASEAN, India became ASEAN’s Summit level partner in 2002 and established a strategic partnership with the regional organisation in 2012 (MEA, 2016a). Throughout, India’s focus has been predominantly on fostering economic ties with ASEAN.
A few months before the inaugural India–ASEAN Summit in 2002, India’s Prime Minister Atal Bihari Vajpayee while stating India’s intentions to be a part of the ASEAN Free Trade Area and ASEAN Investment area stressed India’s appreciation of regional economic integration as a means of cushioning the impact of overdependence on external markets (MEA, 2002). ASEAN had just bounced back from the Asian financial crisis of 1997–1998 that unearthed the susceptibilities of the region which was until then allowing capital flows without sufficient financial oversight. This exposed the Asian financial market to external manipulation, mainly by advanced economies such as the United States of America. However, the open economies of ASEAN, although impacted, were resilient and managed to recover from the crisis, albeit mostly with the International Monetary Fund’s (IMF) prescriptions; largely viewed as unsuitable for the region (Narine, 2002; Yahya, 2003). Consequently, there was a renewed determination for Asian regionalism. Among the most prominent outcomes of the crisis was the establishment of a regional currency swap arrangement by ASEAN + 3 (ASEAN plus its dialogue partners of China, Japan and South Korea). The Chiangmai Initiative, established to address short-term liquidity difficulties in the region, was an alternative to IMF in managing future crises in the region (ADB, 2015). India, unlike ASEAN, remained mostly unscathed by the 1997 Asian financial crisis precisely because its economy was not as integrated with the global economy (Dua & Sinha, 2007). So, Vajpayee called for a synergistic partnership between India and ASEAN through, among others, a Free Trade Agreement (FTA) (MEA, 2002).
Subsequently, after a six-year negotiation, the AITIGA came into force in 2010 (ASEAN, 2012). Later, India joined the RCEP negotiations, a 16-country trade pact in early 2013. The RCEP brought all of ASEAN’s six FTA partners: Australia, China, India, Japan, Korea and New Zealand together for what was to be a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement (ASEAN, 2016). After having remained as part of the negotiations until the last mile, India withdrew in November 2019. The decision was made to address the concerns over the potential impact of further economic liberalisation on India’s domestic sectors (MEA, 2019). These concerns had their roots in India’s post-Independence economic policies.
India’s Economy: Brief Overview
At the time of Independence in 1947, over 90% of India’s population was from 600,000 villages who were dependent on agriculture for their subsistence. The economy of India then was agrarian, with agriculture contributing to over half of the nation’s income. The country’s GDP contributed about 3% of the world’s GDP with 80% or 250 million of the population living in poverty (Guruswamy, 2017; Manish, 2011). India’s Green Revolution introduced in the 1960s to modernise the agriculture sector entailed heavy government subsidisation of fertilisers, irrigation as well as electricity. Over the years, agricultural subsidies became a fiscal burden for the government and also evolved to create other issues. Studies have shown that although over 80% of farmers in India were small and marginal, the agriculture subsidies were benefiting mostly the advanced agricultural areas run by wealthy farmers in specific regions (Gulati & Sharma, 1995; Joy, 2019). Poverty, therefore, remained persistent in most pockets of rural areas, as a result of the anomalous consequence of the government’s interventions aimed at uplifting the agriculture sector.
Similarly, India’s industrialisation process was driven by import substitution policies aimed at reducing dependence on the international system. Upon Independence, heavy intervention of the state in the machinery of the economy placed the country’s basic and heavy industries under public ownership. Private investments were heavily regulated and as a result inefficient industries were created requiring protection from the government in the form of regulations and high import tariffs (Burange, 2011; Nimish, 2015). As most post-colonial economies in the developing world started to open up their economies, India continued to resist trade for more than three decades after Independence (Nayyar, 2018). After which the 1991 reforms were introduced.
The liberalisation of the economy through the reforms of 1991 did result in encouraging growth of the agriculture and industry sectors, but the main contributor to India’s GDP was in fact the services sector which was also the sector that grew the fastest (World Bank, 2018). India had by then become an economy that was led by the services sector. Even prior to the reforms of 1991, the services sector was the largest contributor to the Indian economy accounting for 41% in 1990 followed by the agriculture (33%) and industry sectors (27%) (Gordon & Gupta, 2003). As such, following the reforms, dismantled regulatory burdens had spurred on the sector even further, having already gained a certain level of artificial comparative advantage over the highly regulated manufacturing sector (Gonzales et al., 2012). The services sector was the largest sector of the Indian economy for the fiscal year 2019–2020, accounting for 55.3% of the economy, while the industry sector as well as the agriculture and allied sectors formed 27.5% and 17.8%, respectively (MOF, 2020).
The reforms introduced in 1991 also set the course for the country’s increased economic integration into the global economy. Trade data obtained from the World Bank indicated that India’s trade constituted 15.5% of its GDP in 1990, this expanded to 26.9% within 10 years. In 2019, India’s trade constituted 40% of the country’s GDP. Over the period, starting from 1990 until 2019, India’s total exports of goods and services registered a growth of over 23 times from US$22.9 billion to US$546 billion, whereas its imports of goods and services grew by over 20 times from US$29.5 billion to US$619.5 billion. In terms of value, imports had always maintained at a higher level compared with exports; giving India a negative trade balance. This trade deficit was mainly due to India’s large imports of goods. In 1990, goods trade deficit registered at US$5.1 billion and experienced a substantial increase from US$10.6 billion in 2000 to US$129.1 billion in 2010. In 2019, India’s goods trade deficit stood at US$157.6 billion. In contrast, India managed to tilt its trade in services to its favour over the years. In 1990, the services trade deficit was US$2.5 billion, but within 10 years, in 2000, the country registered a surplus of US$38.1 billion in services trade. In 2019, the services trade surplus for India was US$84.2 billion (World Bank, 2021).
The surplus in services trade, however, was not sufficient to off-set the deficit the country was experiencing in its trade in goods. Due to this, the positive impact of increased exports to the growth of the country was softened (Kumar & Sood, 2019). This global trade pattern is also reflected in India’s regional trade with ASEAN, as the ASEAN–India FTA developments indicate.
ASEAN–India FTA: Challenges
Although the AITIGA came into force in 2010, it was only in 2015 that the ASEAN–India Trade in Investment Agreement and the ASEAN–India Trade in Services Agreement (AITISA) came into force (ASEAN, 2019c). This was a point of consternation for India, because it meant that the 10 ASEAN member states, with some being major export-oriented manufacturing hubs, had nearly a five-year lead in reaping the benefits of greater market access that the FTA brought. In the decade of AITIGA being in force, trade data from the World Trade Organization (WTO) revealed that India’s negative trade balance in merchandise trade with ASEAN increased more than three folds; from US$6.7 billion in 2010 to US$22.8 billion in 2019 (WTO, 2021a). In comparison in the period of AITISA, India’s trade surplus in services trade with ASEAN increased from US$0.7 billion in 2015 to US$1.1 billion in 2019 (WTO, 2021b).
India’s trade deficit with ASEAN could not be addressed through AITIGA. The Indian small and medium enterprises in sectors such as agriculture, textiles and auto-part manufacturers could not compete with their counterparts from ASEAN and its FTA partners such as China, Japan and Korea (Francis, 2011; Pal & Dasgupta, 2009). Also, the offer given by ASEAN to India in AITISA was not beyond the commitments made by the countries to all other WTO member countries under the General Agreement on Trade in Services (De, 2018). This inevitably created an impasse in the trade negotiation process as India required tighter rules of origin for goods, but greater liberalisation for services. Since there were prospects for a review of AITIGA (ASEAN, 2019b) and India had bilateral FTAs with Japan and Korea (Saraswat et al., 2018), the RCEP did not provide significant access to newer markets. As such, protecting its domestic market took precedence and India withdrew from the RCEP.
However, this inward-looking tendency ran contrary to the purported new economic journey under Prime Minister Modi’s administration. As soon as he came to power, he launched the ‘Make in India’ initiative in 2014 to attract manufacturers both domestic and foreign to set-up their manufacturing plants in India (MEA, 2016b). He also renamed the LEP to the Act East Policy in 2014 as a renewed version and a reinforcement of India’s interests and objectives with ASEAN aligned to the country’s new policy directions (MEA, 2014). In 2016, India ratified the WTO Agreement on Trade Facilitation and unveiled the National Trade Facilitation Action Plan 2017–2020 in 2016 to ensure among others a conducive business environment and ecosystem to support businesses (CBIC, 2016). In 2019, soon after taking over as prime minister for a second term, Modi announced the vision to transform India from a US$2.7 trillion economy into a US$5 trillion economy by 2024 (Baru, 2020).
As such, the withdrawal from the RCEP, seemed incongruent with the initiatives that were being undertaken and had a broad consequence. India’s leadership wanted to position India as a leading power and not merely a balancing global force (PIB, 2015). In order to do this, along with military capabilities and upholding of its democratic values, improving the country’s economic performance and regional integration were paramount (Tellis, 2016). Therefore, the RCEP also had inexorable significance to the country’s strategic imperatives vis-a-vis China’s increasing global dominance and India’s engagements with other major powers, in particular in the Indo-Pacific.
The Indo-Pacific Wave: Emerging Geo-Strategic Partnerships
China’s strong economic fundamentals with GDP growth rates averaging almost 10% annually since it started its reforms (The World Bank, n.d.) have been a boon for many developing economies of the world including for those in Southeast Asia. In this regard, China’s Belt and Road Initiative (BRI) and the Maritime Silk Road Initiative, both officially announced in 2013, are the most significant projects undertaken thus far. With an estimated minimum cost of US$1 trillion, they entailed the integration of more than half of the globe, through transportation networks by land and sea, energy pipelines as well as at least 50 special economic zones (Chatzky & McBride, 2020).
The increased activity in the name of BRI within the Indian Ocean region had raised concerns on the true intentions of those investments; especially for India, in light of investments in the China–Pakistan Economic Corridor development as well as the acquisition of Sri Lanka’s Hambantota port under a 99-year lease (Patrick, 2017). Even so, concerns over China’s activities in the Indian Ocean have been steadily increasing prior to the official launch of BRI, leading to the review of regional contours and the emergence of Indo-Pacific as a new terminology for the wider Asia-Pacific region. The normative geographic allusion of Asia-Pacific typically excluded India; and given China’s rise, it was also China centric. In contrast, India had a pervasive presence in the Indian Ocean region, and thus Indo-Pacific was innately India focused.
The Indo-Pacific conceptualisation is strongly linked to the increase in China’s maritime footprints, dubbed as the ‘String of Pearls’ strategy by the United States of America (Pehrson, 2006). China’s increased focus on oceanic trade and energy supply routes along critical sea lines of communication of the Indo-Pacific was noteworthy, since an estimated 60% of the world’s oil trade alone pass the Straits of Malacca in the east of the Indian Ocean and the Straits of Hormuz in the west of the Indian Ocean (Khurana, 2007). Against this backdrop, strategic relationships began to emerge in the Indo-Pacific region. The most prominent was the Quadrilateral Security Dialogue (Quad); an informal strategic security alliance in the Indo-Pacific consisting of Australia, India, Japan and the United States of America. However, the initial manifestation of the Quad in 2007 was seen by the Chinese as a containment strategy, and consequently the Quad became inactive within a year of its inception (Chellaney, 2007; Ching, 2008). Later it was resurrected after Japan and the United States of America announced their formal outlooks for the Indo-Pacific in 2016 and 2017, respectively. The Indo-Pacific has since been adopted as a formal strategic outlook by Australia, India, ASEAN, the United Kingdom, France and Germany.
Nevertheless, relevant to this analysis are several important connectivity-related initiatives linked to the Indo-Pacific. These initiatives are endeavours to address the lack of transparency in China’s BRI projects. Since 2017, India and Japan have partnered towards elevating the state of physical and digital connectivity in Southeast Asia and Africa through the Asia–Africa Growth Corridor projects. These projects reflect the synergy between India’s Act East Policy and Japan’s Expanded Partnership for Quality Infrastructure Policy (Taniguchi, 2020); these are aimed towards supporting the advancement of technology and services between the two extensive continents of Asia and Africa (ERIA, 2017).
The United States of America also launched the Infrastructure Transaction and Assistance Network (ITAN) initiative in 2018 to advance infrastructure across the Indo-Pacific region and, in particular, focusing on Asia’s infrastructure needs. ITAN aims to facilitate private sector investment that is transparent and uncompromising of any country’s sovereignty and sustainable growth, for connectivity projects in the region (USAID, 2019). Another related emerging initiative among Australia, Japan and the United States of America is the Blue Dot Network (BDN). India has been invited to join this network known as a counter initiative to China’s BRI aimed to promote within the region an environment for sustainable and transparent infrastructure development. Although seen as a possible economic alliance within the Indo-Pacific, the BDN however is not meant to provide loans for infrastructure projects but instead endeavours to provide evaluation and certification that is globally accepted and recognised for infrastructure projects within the Indo-Pacific region (Gilani, 2020; Panda, 2020). The momentum of these initiatives snowballed to the launch of the Build Back Better World by the leaders of G7 countries in June 2021, as a post-COVID-19 pandemic initiative. It is a global infrastructure endeavour aimed at addressing the infrastructure needs of the developing world estimated to require over US$40 trillion. Guided by the standards and principles of the BDN, investments are expected to be channelled by private sector as well as the relevant finance institutions of the G7 countries (White House, 2021).
India on its part also augmented its own 2018 Indo-Pacific vision with the Indo-Pacific Ocean’s Initiative (IPOI) of India, in 2019. This was a more focused initiative towards establishing a mechanism for multilateral cooperation built on India’s Act East (focusing on the Eastern Indian Ocean and the Western Pacific) and Act West (focusing on the Western Indian Ocean) narratives (Saha & Mishra, 2020). IPOI also provides an alternative platform for Quad members to cooperate. Australia and Japan have agreed to be lead partners for the maritime ecology and connectivity pillars, respectively; while France is also expected to join the initiatives of IPOI (DFAT, 2020; Embassy of Japan, 2021; Kagrana, 2021). Apart from the above, an economic network among India, Australia and Japan is already developing, particularly inspired and expedited by disruptions in the global supply chain networks due to the COVID-19 pandemic. One that is in discussion is the Resilient Supply Chain Initiative in the Indo-Pacific to reduce dependence on China. In the long term, this is a development that may see the relocation of investments and production hubs from China to India and also Southeast Asia (Palit, 2020).
These initiatives are all important to India’s economic growth, but they also entail the challenges that greater integration brings to its domestic economy, similar to FTAs.
India–ASEAN–Indo-Pacific Partnership
The challenges that India faces with FTAs, in general, and the RCEP, in specific, are not new. ASEAN countries vying to tap into India’s huge domestic market were hopeful for India to further relax its protectionist tendencies through external pressures that regional trade pacts such as the RCEP brought. Therefore, the consequence of India’s absence from the RCEP is inevitably linked to the country’s inability to rise up to the challenge of a globalised economy led by China. As such, there are critical linkages between India’s rising strategic profile and India’s economic challenges. These linkages are important to India–ASEAN partnership in similar ways that the RCEP was. Indeed, the RCEP and Indo-Pacific are regional arrangements that are quite different. One is a formal trade pact, while the other is still an amorphous evolving geo political grouping. Nevertheless, at least one basic variation that is relevant to this discussion is obvious and cannot be disputed: China is fully invested in the RCEP, whereas it remains unsupportive of the Indo-Pacific. Conversely, there is also one important similarity between the two; the RCEP and the major initiatives in the Indo-Pacific are in essence efforts towards greater regional integration. The former is concerned with trade, while the latter is more concerned with infrastructure, and so the economic growth is an indispensable prerequisite within both. Based on these inherent connections between the RCEP and the Indo-Pacific geo-construct, it can be deduced that there are two key factors that have the potential to keep India on course to address its economic shortcomings and strengthen its partnership with ASEAN in the absence of the RCEP. The two key factors are ASEAN’s strategic considerations and India’s market potential.
ASEAN’s Strategic Considerations
The developments related to the RCEP have highlighted certain strategic concerns for ASEAN. India’s absence from the RCEP also means that there is a loss of symmetry that India could have brought to the regional arrangement. For the member countries of the RCEP, this is above and beyond the forgoing of India’s huge domestic market. Although ASEAN-led, without India the RCEP becomes increasingly Chinese dominated, making it more conducive for China to further extend its dominance in the region. ASEAN was already heavily dependent on China’s infrastructure investments and has extensive trade linkages with the country. If India had remained, ASEAN could have improved its chances of balancing out this dependence over time. This improved strategic equilibrium is important to ASEAN member countries who also have unresolved territorial claims with China over the Spratly Islands and Paracel Island in the South China Sea (SCS). Issues regarding the SCS remain complex and protracted. ASEAN and China had embarked on discussions to finalise a SCS Code of Conduct in 2002, but it was only in 2018 that a first draft was agreed upon with negotiations aimed to be finalised by 2022 (ASEAN, 2019b; Thayer, 2018). Meanwhile the cycle of China’s incursions continues, with the Philippines, Vietnam and Malaysia appropriately reacting with formal warnings and demarches (Calonzo, 2021; CFR, 2021; Lim, 2021; Nguyen & Vu, 2020). The SCS incursions are reflective of the blatant asymmetric power configuration within China–ASEAN ties that China wantonly exerts from time to time. Therefore, it is becoming more important for ASEAN to consider India’s growing strategic collaborations with other regional powers and its impact on ASEAN.
In this regard, there is much scope within the India–ASEAN partnership to build on certain initiatives. India’s partnership with ASEAN in the strategic domain has seen some important progress ever since the Indo-Pacific gained traction. Vietnam whose littoral disposition coupled with its territorial dispute in SCS feature prominently in India’s defence cooperation with the country. In furthering bilateral defence cooperation, India extended US$500 million line of credit to Vietnam for the purchase of Indian military equipment (Rajagopalan, 2018). India’s largest oil and gas exploration company, the state-owned ONGC Videsh Ltd. (OVL), has been involved in oil exploration in the SCS together with Russia’s Rosneft and PetroVietnam since 2006. Beyond economic reasons, OVL’s presence in the contested waters poses a significant challenge to Chinese continuous encroachment of Vietnam’s exclusive economic zone. As such, Vietnam’s strategic partnership with Quad members is important to support the country’s diplomatic and legal struggles in protecting its maritime sovereignty (Thuong & Oanh, 2021).
The Indo-Pacific region is important to Indonesia as it viewed itself as the ‘Global Maritime Fulcrum’ situated between the two continents of Asia and Australia (Saragih et al., 2018). Indonesia uses Global Maritime Fulcrum to both align with China’s BRI (Xinli, 2019) as well as with the various Indo-Pacific-related strategies (Chan, 2018). In fact, Indonesia was critical in the championing for an ASEAN Outlook on Indo-Pacific and its subsequent formulation in 2019 (Acharya, 2019). As for India, specific importance in India’s maritime cooperation with Indonesia is the expanding of maritime connectivity between Aceh and the Andaman and Nicobar Islands in the Indian Ocean (Rajagopalan, 2019). An important breakthrough in India’s military diplomacy came in 2018 when India gained access to Indonesia’s Sabang Port in Sumatra situated at the head of the Malacca Straits (Chauduri, 2018). This in effect supports India’s power projection in the region as the access would enable India’s Navy to maintain its presence in the region without having to construct a naval base.
There were other initiatives that India was taking to this effect, mainly the military logistics agreements signed with Singapore in 2018 (MOD, 2018) and which is also expected with Vietnam in 2021. It is to be noted that India has already embarked on an Indo-Pacific-wide network of military logistics arrangement that involved all Quad members, as well as France and South Korea. Soon to join are Russia and the United Kingdom (Pandit, 2020; Peri, 2020; Rej, 2020; Siddiqui, 2019). As such, some of India’s strongest strategic allies within ASEAN were already linked to the Quad.
Strengthening strategic ties with India also means that ASEAN reinforces its centrality. This is mainly because India’s vision for the Indo-Pacific seeks to leverage on ASEAN’s regional linkages and various multilateral platforms, ensuring support for ASEAN centrality and in the process rendering further credence to ASEAN existentialism. India’s practice of strategic autonomy has been criticised on the grounds that it rendered the country’s leadership an unfavourable ambivalent tone (Mukherjee, 2019; Tikerpuu, 2019); nevertheless, it is also the same strategic autonomy that ensures India’s pursuit of regional leadership in the Indo-Pacific is cooperative and inclusive.
The focus on the Indo-Pacific continues to sharpen as the concept itself gains more traction among like-minded countries. These countries have all started to engage more intensely with each other through initiatives that seek to address the power imbalances that the COVID-19 pandemic has helped to highlight even more clearly. Within these various configurations, India constantly features as a prominent Asian-power component. ASEAN economies who are mostly deeply integrated into the global economy cannot be indifferent to the power play that is shaping in the Indo-Pacific theatre.
India’s Market Potential
The other major consideration in India’s partnership with ASEAN is market potential. After a contraction of 8% in GDP for the year 2020, IMF has projected India’s economy to bounce back with a 12.5% growth in 2021 before gradually stabilising to 6.5% by 2026 (IMF, 2021). Nevertheless, in order for India to stay on the growth trajectory, India will not be able to continue being closed to increasing competition. It would need to adopt an offensive approach towards the global economy, where the tendency is more to project and less to protect its industries. Subsequent to India’s RCEP withdrawal, there have been discourses regarding the actual state of its uncompetitive domestic players and the need for better industrial and agriculture policies. These discussions capture the whole gamut of challenges India faced with its FTAs. They relate mainly to India’s absence from global supply chains, harmful protectionist policies, misalignment from changing world order (Chaturvedi & Sharma, 2020), opportunity to strengthen domestic industries and becoming self-reliant (The Economic Times, 2021) as well as the need to align the goals of foreign trade policy with ‘Atmanirbhar Bharat’ and Make in India initiative to progressively reduce trade deficit (Bhutani, 2021; Priya & Ghosh, 2020). Modi’s ‘Atmanirbhar Bharat’ campaign or Self-Reliant India package of US$265 billion was announced in 2020 to revive India’s economy following the impact of the COVID-19 pandemic lockdown (Ghosh, 2020). It also includes reforms to the micros, small and medium enterprises, labour market, industries and India’s vast middle class (IBEF, 2020).
There is also an increased focus towards enhancing manufacturing capabilities and competitiveness within. The Export Preparedness Index report prepared by NITI Aayog and the Institute of Competitiveness in 2020, based on the assessment of all the states and union territories in India,revealed three fundamental challenges to export promotion in India: disparities in export infrastructure, poor trade support and growth orientation as well as poor research and development infrastructure to promote complex and unique exports. The findings highlighted the focus of ‘Atmanirbhar Bharat’ for ensuring appropriate export promotion policy, infrastructure as well as business environment to enhance India’s exports to achieve the ultimate goal of making India a developed country (PIB, 2020). The Export Preparedness Index report which was released days after Prime Minister Modi’s Independence Day speech of 2020 emphasised the need for India in facing the onslaught of COVID-19, to build domestic competencies, towards becoming a key player in the global trading market (ABP News Bureau, 2020). This is an important message that indicates that India was keen to take advantage of the situation presented by the COVID-19 pandemic when most countries were becoming protectionist. India’s push towards being outward looking to integrate into the global market could support industry competitiveness through export-oriented growth (Bhutani, 2020).
Given these developments, as India attempts to address the imbalances through a review of AITIGA, it will also provide an opportunity for ASEAN to explore new areas for mutual benefits including those induced by the COVID-19 pandemic. One such area is healthcare and biotechnology. Global dependence on India in the healthcare and medical sector became more prominent during the COVID-19 pandemic, and India’s strength in biotechnology remains one of the areas that have not been fully explored by the ASEAN economies. India, the largest vaccine manufacturer in the world, had been critical in distributing vaccines to several developed and developing countries in early 2021, and this had supported the global management of the pandemic (Roy & Shah, 2021). Vaccine diplomacy has also developed as an important component in international relations with India emerging as a key player (Bisht, 2020; Vaidyanathan, 2020).
In addition to this, India’s involvement in the Indo-Pacific wide infrastructure constellations will further augment ASEAN’s access into newer markets. ASEAN’s export-oriented economies who are constantly in need of newer markets and novel joint venture collaborations stand to gain much in terms of improved connectivity in the Indo-Pacific region. India’s involvement in connectivity initiatives raises the possibility for a significant portion of India, which is not in the BRI grid, to also be bridged. This is also advantageous to India whose ‘Make in India’ initiative aims to attract more foreign direct investments into the country to make it a manufacturing hub. Since infrastructure development is key for the success of ‘Make in India’ in the next five years, India has envisioned a US$1 trillion National Pipeline Project involving 7,000 projects in various sectors for the infrastructure development of the country (PM India, 2020). India’s strategic partnerships within the Indo-Pacific will be important to attract private capital in this regard. In line with this, the indications for the revival of India’s FTA talks with the European Union (IANS, 2020) as well as Australia (Suneja, 2021) and for the strengthening of trade ties with the United States of America (The Indian Express, 2021) are positive developments. These partners have more leverage to provide important impetuses for India to embark on the necessary reforms, most importantly without the threat of imports from China. As such, fostering business partnerships, where latent economic complementarities can be optimised for mutual benefit still hold great promise, for furthering the India–ASEAN economic partnership without the RCEP.
Conclusion
India’s ‘no’ to the RCEP was not because it did not believe in free trade, but because its domestic industry was not ready for the rules that the RCEP dictated. India’s on going initiatives after its withdrawal from the RCEP to strengthen its economy as well as interest in resuming certain FTA negotiations attest to this. Therefore, India was still open to reforms and economic integration. The emerging geo-strategic dynamics within the Indo-Pacific is unlike the RCEP, and there is no immediate China threat to India’s industry players. As such, India will be more receptive to the strategic push for reforms, in order to gain from this partnership. Meanwhile for ASEAN, India remains a huge market potential and within the Indo-Pacific is gaining traction as an important strategic partner. Collectively, these factors will ensure that India’s partnership with ASEAN remains strong even without the RCEP.
Footnotes
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The authors received no financial support for the research, authorship and/or publication of this article.