India and Southeast Asia: Act East

How India's trade and investment ties with Southeast Asia have grown under its Look East and Act East policies, and why many Indian exporters want the trade deal revised.

India and Southeast Asia have ancient links through trade, religion and culture. In modern times, India has tried to rebuild economic ties.

Look East to Act East

In 1991, India launched its Look East Policy to deepen ties with Southeast Asia.
In 2014, it was renamed Act East, emphasising action on trade, connectivity and security.

Trade

The ASEAN-India Trade in Goods Agreement came into force in 2010.
Trade grew substantially, making ASEAN one of India’s largest trading partners.
But India’s imports grew faster than its exports, widening its trade deficit with ASEAN. Indian industry complained that the deal favoured ASEAN, and worried about Chinese goods routed through ASEAN countries.

India and ASEAN began reviewing the agreement, known as AITIGA, in 2023, with India seeking better market access and stricter rules of origin.

Investment

Singapore is one of the largest sources of foreign investment into India, partly because many global funds invest through Singapore.
Indian firms have invested in Southeast Asia in areas like IT, pharmaceuticals and automobiles.

Connectivity

The India-Myanmar-Thailand Trilateral Highway aims to link India’s northeast to Southeast Asia by road, though progress has been slow, especially given Myanmar’s conflict.
The Kaladan project aims to connect India’s northeast to the sea through Myanmar.
Direct flights and shipping links have increased.

Digital links

India has linked UPI with Singapore’s PayNow since 2023, allowing instant cross-border transfers, and has worked on similar links with other countries in the region.

Why it matters

Better links with Southeast Asia could help India’s northeast develop, diversify trade and let Indian firms join Asian supply chains.

The instant transfer

An Indian nurse working in Singapore sends money to her family in Kerala through a UPI-PayNow link. The transfer arrives in minutes at low cost, instead of taking days through traditional channels.

Thinking the ASEAN deal has only helped India

India's trade deficit with ASEAN widened after the deal, leading India to seek a review.

Key takeaways

India's Look East Policy (1991) became Act East in 2014.
The 2010 ASEAN-India goods agreement boosted trade but widened India's deficit.
India and ASEAN began reviewing the agreement in 2023.
Singapore is a top investor, and UPI links with PayNow since 2023.