In the pursuit of growth, India and Asean should be natural partners

By seeking to tap and complement each other’s vast and growing markets, these two nascent economic powerhouses can further bolster their growth potential.
India’s and Asean’s economies, if combined, would comprise the third-largest economy in the world, spanning 18 per cent of the planet’s population. 
Crucially, affluence, while still low compared to the United States or Europe, is rising. About 550 million Indians will be defined as middle class by 2025, double the number they are today – and adding more to the global pool than any other country. 
Similarly, in the ten-member Association of Southeast Asian Nations (ASEAN) region, the number of middle class households is forecast to top 120 million by 2025, roughly double what it was in 2010. Greater mutual market access would allow both economies to get greater traction. 
In fact, some links are already in place, and improving.
For example, India’s North-eastern states are connecting with Asean through the Thailand/Myanmar trilateral highway and deep-sea ports. 
At present Asean is India’s fourth-largest trading partner, accounting for 10 per cent of India’s total trade, while India is Asean’s seventh-largest trading partner. 
But all this only touches the surface of what could be possible if India and Asean worked to reduce the barriers that currently still stand in the way of greater bilateral trade and investment flows.
For Asean and India, the focus currently will be on the completion of the Regional Comprehensive Economic Partnership (RCEP) – the multi-lateral trade accord that is spearheaded by Asean and involves six of its free trade agreement partners, including India and China, which together cover 50 per cent of the world’s population. 
India has warmed to RCEP recently, committing to eliminate up to 80 per cent of its goods tariffs in return for greater market access to Asean (and other signatory members’) service sectors and freer movement of its labour. 
Doing so will unlock significant growth potential for India’s burgeoning IT services sector, which constitutes 48 per cent of its total exports. The conclusion of the deal could collectively boost exports amongst the participating countries by 4 per cent going forward. 
RCEP members hope to conclude the agreement in time for the Asean summit in Singapore this coming November.
Improving trade accords that open the trade and investment pipes should remain the topline strategy but in the meantime, the commercial and investment ties between Asean and India need to grow in innovative and practical ways. 
Building on the existing beachheads mentioned above is an obvious start. Utilising leadership meetings like the recent Delhi Summit that marked the 25th anniversary of the formal Asean-India dialogue – is another. 
But ultimately the key to increased entry of foreign companies and greater mutual business ties will be through supply chains.
Take the example of Apple. The iPhone manufacturer, which already has a strong supply chain in Asean, last year began to manufacture iPhones in India, to capitalise on the expected growth of smartphone ownership in that market. 
The broad electronics supply chain is vital to Asean, making up 30 per cent of the region’s total exports. This ranges from Singapore’s semi-conductor foundries, to chip testing in Malaysia, and assembly in the Philippines, Thailand and Vietnam.
What’s not to say that the companies that already support Apple in Asean cannot follow its move to India? 
There is a myriad of examples across all facets of consumption that can replicate this (think fashion, food, pharmaceuticals), |and many more in future as Indian incomes |rise. 
India and Asean may not have the heft of the US, EU or China’s economies. But they are rapidly becoming economic powerhouses that play a growing role in the global economy. Deeper ties between them will help both gain further international significance. 
Against that backdrop, global conglomerates - and their regional supply chains – seeking fresh drivers of growth need look no further than these two markets.

Contributed by TONY CRIPPS, Chief Executive Officer, HSBC Singapore