It has been 14 years since India first announced its ‘Look East’ policy. However, other than joining an alphabet soup of Asian regional fora, New Delhi has had little concrete to show for all its talk of joining the Indian growth story to the world’s most dynamic economic region. New Delhi’s entire Asia-Pacific outlook was half-jokingly called ‘Look East, then look away.’
This is why completion of the trade agreement between India and the Association of Southeast Asian Nations (Asean) is as much a matter of relief as applause. It is notoriously difficult to get India to sign on the dotted line of a free trade document. Negotiating tariff reductions with a group of economies whose duties were among the lowest in the world was particularly challenging — it seemed India was making all the concessions.
It needs to be understood that this free trade agreement was about more than just cheaper imports for Indian consumers and more market access for Indian exporters. The agreement has been a litmus test of India’s interest in being an Asia-Pacific player. If New Delhi had failed to conclude a simple trade pact with Asean, given the importance of economics to Asia-Pacific diplomacy, it would have effectively meant the end of Indian influence beyond the Straits of Malacca.
This is not to say trade per se is not important. Collectively, the Pacific rim is the biggest and fastest trading partner India has. Asean trade is a tenth of India’s total and has gone well beyond duty-free shopping — a quarter of this trade is oil.
Asia is also moving up as a source of investment. An Indo-Asean treaty on investment and service trade is expected to follow the completion of the free-trade agreement. This is of equal importance: India’s broader trade agreement with Singapore led to a blurring of trade and investment as thousands of Indian firms set up shop on the island-nation. Such corporate activity will be at the heart of any long-term Indian engagement in Asia.
The FTAs with South Korea and Japan are in a mature stage of negotiation. Completing these agreements will further compensate for the past meandering of the ‘Look East’ policy. India can no longer afford to merely look, it needs to be actively involved in the East.