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India’s engagement with the ASEAN Free Trade Agreement (FTA), particularly the ASEAN-India Trade in Goods Agreement (AITIGA), is facing a serious credibility test. Despite the apparent benefits of tariff concessions and market access, Indian industry’s utilisation of the FTA remains disappointingly low—especially in exports to Thailand, where usage of the preferential trade route is reported to be below 50%. The Commerce and Industry Ministry is now reviewing the pact to assess barriers and curb misuse, a move that could redefine India’s trade dynamics with Southeast Asia.

The Utilisation Gap: A Missed Opportunity

The AITIGA, signed in 2009 and implemented in 2010, was envisioned as a vehicle for enhanced economic integration between India and ASEAN. However, the preferential benefits that were meant to promote Indian exports are being left on the table. In sectors such as plastics and chemicals, where India has considerable export potential, products continue to face Most-Favoured Nation (MFN) duties of 3–30% in Thailand—even though the same goods could enter duty-free under the AITIGA. This underutilisation suggests a systemic issue either in awareness, compliance, or perhaps procedural hurdles that disincentivise exporters from opting for the preferential route.

Rising Deficit, Stagnant Gains

A quick look at the trade data underscores the urgency of reform. India’s trade deficit with ASEAN has been consistently high over the years:

FY18: $9.56 billion

FY19: $21.79 billion

FY20: $23.85 billion

FY21: $10.17 billion (COVID-19 effect)

FY22: $23.77 billion

FY23: $43.57 billion


The fiscal year 2023 alone witnessed a staggering $43.57 billion deficit—reflecting not only growing import dependence but also an ineffective export strategy. ASEAN countries account for nearly 92.7% of India’s exports to the bloc and 97.4% of imports from it, indicating a highly imbalanced trade relationship.

Core Issues: Beyond Tariffs

There are multiple structural and procedural hurdles that have limited the FTA’s effectiveness:

1. Non-Tariff Barriers (NTBs): Many ASEAN countries, including Thailand, have retained regulatory measures that act as covert barriers to Indian goods, such as complex product standards and certification requirements.


2. Underutilisation by SMEs: Many small and medium exporters in India are unaware of FTA benefits or find the documentation and compliance process cumbersome.


3. Rules of Origin Loophole: One growing concern is the backdoor entry of goods from third countries into India via ASEAN, exploiting the concessional duty regime. This not only hurts domestic manufacturers but also undermines the spirit of the FTA.


4. Lack of Reciprocity: While India has fulfilled most of its tariff elimination commitments under the agreement, ASEAN members have often delayed or diluted their corresponding obligations, especially on sensitive product lines.

Thailand’s Contradiction

Thailand’s approach exemplifies this asymmetry. While the AITIGA allows Indian exports to enter duty-free, Thailand often imposes MFN duties between 3% and 30% on similar goods, particularly in plastics and chemicals. This raises questions on whether tariff elimination commitments are being uniformly honored.

The Way Forward: Review, Reform, and Reclaim

The government’s decision to review the AITIGA is both timely and necessary. The objective is not to retreat from global trade but to realign the terms of engagement in ways that deliver tangible value to Indian businesses. Key recommendations could include:

Simplifying Procedures: Streamlining compliance, digitising documentation, and providing handholding support to MSMEs.

Monitoring Reciprocity: Ensuring that partner countries are adhering to tariff commitments under AITIGA.

Correcting Asymmetries: Rebalancing trade by negotiating better terms for high-potential Indian exports.

Plugging Loopholes: Introducing strict checks on rules of origin to prevent third-country misuse.

Trade Deals Need Teeth

The ASEAN-India FTA has great strategic value, especially in an era of regional realignments and supply chain diversification. However, unless it evolves into a fair, transparent, and mutually beneficial instrument, it risks becoming just another paper pact. India’s review of AITIGA is not a sign of trade protectionism, but a call for rules-based fairness, better utilisation, and national economic interest.

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