India May Walk Away from ASEAN Trade Deal as Review Stalls and Chinese Goods Flood Market

 India May Walk Away from ASEAN Trade Deal as Review Stalls and Chinese Goods Flood Market

Frustrated by ASEAN’s slow pace in fixing a lopsided free trade agreement, India is seriously considering pulling out of the 15-year-old deal. Despite holding nine rounds of talks to review the ASEAN-India Free Trade Agreement (AITIGA), there’s been little progress — and New Delhi’s patience, along with that of Indian industry, is wearing thin.

Sources familiar with the matter said the government might invoke the pact’s termination clause if the upcoming 10th round of talks doesn’t lead to substantial revisions. That meeting is expected to take place in New Delhi next month.

Signed in 2009 and in effect since January 2010, the agreement has long been criticised for being skewed in ASEAN’s favour. One of the biggest pain points? The lack of strict “rules of origin” provisions — a loophole that’s allowed a flood of Chinese goods to enter the Indian market through ASEAN countries, undercutting local industries.

India’s trade deficit with ASEAN has ballooned from $5 billion in 2010-11 to a staggering $43.57 billion in 2022-23. That spike pushed the Modi government to push for a review, with the first round held in May 2023. But progress has been sluggish — and some officials believe that’s intentional. “Many ASEAN countries are dragging their feet because the deal works so well for them. But if this continues, India may be forced to take a firm stand,” said one official.

The agreement does allow for termination — either side can issue a formal notice, and the pact would end 12 months later.

Critics say the deal was flawed from the start. For instance, Singapore committed to removing 100% of tariffs — but since it already had zero duties on most goods, India gained nothing in return. Meanwhile, India opened up 74.2% of its tariff lines, but ASEAN countries cleverly averaged out their offers — including Singapore — to appear more generous.

The imbalance has led to underutilisation of the FTA by Indian businesses. Only about 30–40% of eligible trade benefits are being used by Indian exporters, while ASEAN countries like Vietnam and Indonesia are tapping into 65–70% of the agreement’s advantages.

Indian industry leaders are calling for urgent corrections. “India must press hard for a fairer deal,” said Jasbir Singh of FICCI. Others, like Tarun Khulbe of Jindal Stainless, added that tariff distortions and substandard imports need to be addressed urgently.

The next review round could be make or break — and India might not wait much longer.