ASEAN seeks deeper tariff cuts as India pushes FTA review to narrow trade deficit
Negotiations are underway for a formal review of the ASEAN-India Trade in Goods Agreement (AITIGA), with the Commerce Department in consultation with domestic industry to identify product categories where deeper tariff concessions can be offered without harming Indian producers.
ASEAN members are seeking broader and deeper tariff cuts from India; India's primary objective is to rebalance an agreement that has generated a structurally widening trade deficit in ASEAN's favour since 2010.
Key Indian concerns include asymmetric tariff liberalisation, weak rules of origin enforcement that allows Chinese goods to enter India via ASEAN at preferential tariff rates (transhipment abuse), and insufficient market access for Indian services and investments in ASEAN.
AITIGA — Structure and History
The ASEAN-India Trade in Goods Agreement (AITIGA) was signed on 13 August 2009 in Bangkok and entered into force on 1 January 2010. It originated from the Framework Agreement on Comprehensive Economic Cooperation between India and ASEAN (2003). AITIGA covers physical goods only — a separate ASEAN-India Trade in Services Agreement was signed in 2014, and together with an Investment Agreement, the three constitute the ASEAN-India Free Trade Area.
Key Details
- AITIGA committed both sides to eliminate duties on 76.4% of goods and liberalise tariffs on over 90% of goods progressively.
- However, tariff liberalisation was asymmetric: India opened 71% of its tariff lines, while major ASEAN economies offered far less (Indonesia: 41%, Vietnam: 66.5%, Thailand: 67%).
- ASEAN has 10 members; less-developed members (Myanmar, Laos, Cambodia) were given longer timelines for tariff reduction.
- A formal review by a Joint Committee began in 2024, with multiple rounds of negotiations completed.
The current push for a review is a direct consequence of AITIGA's structural asymmetry — both sides want modifications, but their objectives diverge sharply.
India's Trade Deficit with ASEAN
Since AITIGA's implementation in 2010, India's exports to ASEAN grew by approximately 65% while imports from ASEAN surged by over 186%. This has produced a rapidly widening structural trade deficit.
Key Details
- India's trade deficit with ASEAN: USD 7.5 billion (2011) → approximately USD 44 billion (2022–23) → USD 45.2 billion in FY 2024–25 (exports USD 38.96 billion, imports USD 84.16 billion).
- India's exports to ASEAN fell 5.77% year-on-year in FY 2024–25; imports grew 5.65% — showing the deficit is widening, not stabilising.
- Key imports from ASEAN: electronics, electrical machinery, palm oil, coal, chemicals.
- Key exports from India to ASEAN: petroleum products, machinery, pharmaceutical products.
The widening deficit is the fundamental driver of India's demand for a renegotiated AITIGA — the current review seeks to correct structural imbalances that were baked into the 2009 agreement.
Rules of Origin and Transhipment Abuse
Rules of Origin (RoO) are criteria used to determine the national source of a product under trade agreements. In FTAs, goods manufactured in a partner country attract preferential (lower) tariffs; goods merely transshipped through a partner country without substantial transformation should not. Weak RoO enforcement creates a loophole where goods from non-FTA countries can enter via a partner nation at preferential rates.
Key Details
- India has flagged that Chinese goods — particularly steel, electronics, and solar components — are entering India through ASEAN nations with minimal processing, exploiting the absence of a "melt-and-pour" (substantial transformation) clause in AITIGA.
- India seeks product-specific, granular RoO with defined value-addition thresholds to prevent this circumvention.
- Transhipment abuse undermines the intent of FTAs: preferential tariffs are meant to reward genuine regional production, not facilitate third-country dumping.
- India's AITIGA review demand for tighter RoO is consistent with its broader trade policy — similar provisions are being sought in ongoing FTA negotiations with the EU and GCC.
ASEAN's demand for deeper tariff cuts from India, and India's counter-demand for tighter RoO and deficit correction, represent the central tension in the current review round.
Free Trade Agreements — India's Evolving Approach
India's approach to FTAs has shifted from cautious skepticism (India stayed out of RCEP in 2019) to selective, outcome-oriented engagement (FTAs signed with UAE and Australia in 2022). The ASEAN review fits this recalibrated doctrine: India wants FTAs that deliver reciprocal market access and do not enable third-country circumvention.
Key Details
- India withdrew from RCEP (Regional Comprehensive Economic Partnership) in November 2019, citing concerns about Chinese goods flooding the Indian market — the same structural concern driving the AITIGA review.
- RCEP entered into force in January 2022 without India; it includes China, ASEAN-10, Japan, South Korea, Australia, and New Zealand.
- India's FTAs signed post-2021: India-UAE CEPA (2022), India-Australia ECTA (2022), India-EFTA Trade and Economic Partnership Agreement (2024).
- The AITIGA review is closely watched as a test of whether India can achieve balanced trade through renegotiation rather than exit.
The ASEAN FTA review is the largest ongoing trade negotiation for India by volume of trade at stake and is directly linked to India's manufacturing ambitions under Aatmanirbhar Bharat.
- AITIGA signed: 13 August 2009, Bangkok; entered into force: 1 January 2010.
- India-ASEAN combined population: approximately 1.9 billion; combined GDP (at agreement signing): USD 4.5 trillion.
- India's trade deficit with ASEAN FY 2024–25: approximately USD 45.2 billion (imports USD 84.16 bn; exports USD 38.96 bn).
- India opened 71% of tariff lines under AITIGA vs Indonesia's 41%, showing deep asymmetry.
- India exited RCEP negotiations in November 2019 — same structural concerns as the AITIGA review.
- Formal AITIGA Joint Review Committee established: 2024; multiple negotiating rounds completed through mid-2026.
- ASEAN's 10 members: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam.