Promoting Economic Connectivity between India and ASEAN
Together ASEAN and India have a combined GDP of over $ 5 tn and constitute two of the fastest growing regions on the planet. Everyone realises the importance which India attaches to trade, investment and business partnership with our counterparts in the ASEAN region. India and ASEAN currently have bilateral trade of $ 79 bn in 2017-18, as compared to $ 69 bn last year, an increase of 15%. Considering the geographical proximity of India with the ASEAN countries, it is very important that we strengthen our economic linkages, and it is in this backdrop that trade and investment can play an instrumental role in furthering our ties.
Moving from Looking East to Acting East
If you carefully look at the recent initiatives of the Government of India launched by Prime Minister Modi, they actually aim at greater economic engagements with different regions of the world and in that ASEAN region has assumed a special role as part of India’s Act East policy, since we have had historical, cultural, religious, linguistic and economic linkages. The policy puts emphasis on connectivity projects, people-to-people exchanges, space cooperation, science and technology, etc. which have the potential for increasing regional integration and prosperity
Make in India Initiative
In promoting investment between the two regions is where the flagship programmes like the ‘Make in India’ initiative become important. Invest India is the operational arm of Make in India, and we are the first point of contact for any investor looking to enter into India. Our mandate is to facilitate and handhold investments right from market opportunity assessment, policy and regulatory advisory, partner identification and policy advocacy.
Invest India is currently working with around 35 companies from ASEAN with an indicated investment of $ 13 bn. Since 2014, we have received around 180 investment queries from ASEAN region, in sectors including food processing, auto, chemicals, logistics and financial services.
We have been facilitating several companies from the ASEAN region.
Since 2000, we have received an FDI of $ 77 bn from ASEAN countries, and this number is only going to increase in the years to come.
A special mention would be the India Investment Grid, a key initiative of Invest India, which is a portal where potential investors can identify and search for investible projects across the country, and across sectors. Make in India is an opportunity for ASEAN to invest more in India and trade more with India.
Creation of Regional Value Chain
To further expand India-ASEAN economic partnership and that too at a faster pace in future, Regional Value Chains need to be created on an urgent basis. This would also be important to add value to the agriculture sector and the food processing sector. India is the world’s 2nd largest producer of food grains and the world’s largest milk producer.
India is a global hub for design and engineering R&D, that is critical to any value chain. India and ASEAN can exploit their complementariness in value chains. India is the no. 1 choice for tech MNCs and hosts the maximum number of tech R&D centres outside their home countries. Some such linkages do exist, but it would be worthwhile to highlight that we together need to do this at an increased pace.
There are several sectors amenable to regional value chains such as leather, textiles & garments, pharmaceuticals, automobiles, machinery etc.
India has already set up a Project Development Fund of around $ 100 mn and we need to facilitate Special Purpose Vehicles so that Indian investment flow to the CLMV region. The ASEAN members need to collaborate in this endeavour so that we all are part of stable, viable and dynamic Regional Value Chains. In this too, trade and investment would play defining roles and help to realise the vision which is getting evolved.
Another area which would hold the key to greater cooperation between India and ASEAN would be with Startups. India will have the largest human capital in the world of 1.5 billion by 2025, of which 1 billion will be below the age of 35. India will have a workforce of 850 million and with an average age of 29, India will be the youngest country on the planet. India is now the 2nd largest startup hub by number of startups, with more than 4 startups sprouting up every day, amounting to more than 20,000 startups with a combined market value of more than $ 50 bn.
Invest India is also the operational arm of the Startup India initiative. Since the launch of the Startup India initiative, a year-on-year growth of 36% was seen in the number of incubators & accelerators in India in 2017, and a total of $ 17.8 bn has been invested in startups since Jan ’16. One of the key activities under the program is to help connect the Indian startup ecosystem to global startup ecosystems through various engagement models.
India Singapore Entrepreneurship Bridge is a digital platform to enable startups, investors and aspiring entrepreneurs of both countries to connect with one another with a focus on knowledge exchange, networking opportunities and capacity building.
The first initiative was the ASEAN India Grand Challenge to support ASEAN startups with a commercially viable solution to solve for India’s key problems through a market access program in 5 states of India. The themes for the challenge include IoT for Smart Cities, Financial Technology & Financial Inclusion, Renewable Energy, Agriculture & Rural Development, Digital Health and Clean India.
There are several other such initiatives including Indo-Israel Innovation Bridge, India Portugal Startup Hub and India Sweden Startup Sambandh.
Cooperation between MSMEs
Indian Micro, Small and Medium Enterprises (MSMEs) account for 45% of total Indian exports and 40% of the country's manufacturing output.
We need to work towards building an agreement to promote cooperation between the Small & Medium Enterprises (SMEs) of the two countries. It would provide a structured framework and an enabling environment to the MSME sector of the two countries to understand each other’s strengths, markets, technologies, policies, etc.
This framework would enable the enterprises to seek cooperation and help each other and also to initiate sustainable business alliances in terms of technology transfers, joint ventures and business partnerships in the MSME sector between the two countries.
India has signed similar pacts with countries including Russia and Morocco recently.
Role of Services Sector and Innovation
The role of the services sector in both regions cannot be overemphasised.Technology changes fast, necessitating continuous interactions between our businesses of India and ASEAN.
There is a strong need for the private sectors of both sides to collaborate in the realm of services so that not only that services’ trade grows faster but also for higher growth in the manufacturing and agriculture sectors.
With the blurring of lines between manufacturing and services, today, unless, we focus on the pace of trade in services, several of the initiatives in the manufacturing and agriculture sectors may not succeed. This is because services enable and facilitate production activities in both the industrial and agricultural sectors.
This may include R&D services, transportation services, environmental services, banking and insurance services, information technology services. These are some of the areas that India and ASEAN would have to focus for any forward movement and faster pace since these services are not available in desired quantity and requisite quality in any one country.
To summarise, promoting economic connectivity between ASEAN and India, will be critical to helping achieve common objectives in the region.