18 Mar India’s look east policy
Many of today’s emerging markets are predicted to be the dominating economic forces of the future, and
none are perhaps more exciting than India and the ASEAN countries. As the global economic glare
continues to shift from the west to the east, what may be of particular interest is how India and ASEAN
will strengthen their ties.
India’s influence in ASEAN has steadily been increasing in recent years. Not only has India consistently
been among ASEAN’s top export destinations, but it has also been a vital source of imports for the
ASEAN region. Historically, key products being imported into ASEAN from India have included mineral
fuels and oils, iron and steel, nuclear reactors, and mechanical appliances. Though trade between the
two behemoth economies did drop slightly in 2019, one might expect a resurgence in numbers, especially
as global supply chains get restructured in a post pandemic world.
While trade in goods has always been a vital component of the India-ASEAN relationship, what is really
starting to gain momentum is the interest by India’s services sector in the ASEAN region. There seems to
be a growing awareness – particularly among India’s ‘new-age’ technology companies – that ASEAN has
a lot of potential which still remains untapped. Several companies are even beginning to act on this
awareness – For example, PeopleStrong (an HR-Tech company based out of India with over 1 million
monthly users) has partnered with ASEAN Business Partners to make an aggressive push into the region
and cement its success here. As the world moves further and further away from the pandemic, many
more companies may decide to jump on the ASEAN opportunity as well.
However, given the wide range of economic development across the ASEAN markets, it may be more prudent to consider certain key economies in the ASEAN region, that are more closely involved with the Indian investment community.
Indonesia – As ASEAN’s largest economy, constituting 35% of the ASEAN GDP, Indonesia certainly
cannot be ignored. In fact, it has perhaps the most in common with India. Both countries are members of
the US$ 1 trillion club and both have large, young, populations that are getting increasingly internet savvy.
Despite these similarities, India has, unfortunately, remained a meagre investor in the Indonesian
economy. According to data from Indonesia’s Investment Coordinating Board, in 2019 India invested US$
58 million in Indonesia, making it the 25 th largest investor in the country. Significantly smaller economies
like Mauritius and the UAE actually made bigger investments than India in that same year. However, this
does not diminish the great potential that the India-Indonesia investment corridor holds for the future.
Indian investors going forward will show particular interest in Indonesia’s infrastructure and health
industries, seeking to make investments in roadwork, urban railways, oil and gas, and airports.
As these two juggernauts move closer and closer together, their combined influence in the region will certainly be
one to watch out for.
Malaysia – widely regarded as the second most developed economy in ASEAN. India’s role in the
Malaysian economy is not one to be underplayed. It serves as an important source of investment to both
the manufacturing and services sectors in Malaysia, and several ‘big-name’ Indian corporations such as
Reliance Group, Biocon, TCS, and Wipro have established their footprints on Malaysian soil over the
years. In manufacturing, Indian companies have shown particular interest in textiles, chemicals,
pharmaceuticals, and food manufacturing. While, in the services sector, IT services have received the
lion’s share of investment from Indian corporations. In a post-pandemic world, as both economies look to
recover, it will be interesting to see how relations between India and Malaysia evolve, especially because
Malaysia is one of handful of countries that has a bilateral investment treaty with India.
Vietnam – Among the most talked about emerging markets in the world, Vietnam has been garnering a
lot of attention from investors in recent years, especially as companies have been considering their ‘China
plus 1’ strategies. This trend does not seem to have escaped India. According to a 2020 dated by
Vietnam Briefing, India has more than 270 projects in Vietnam with total investments amounting to nearly
US$ 2 billion. Furthermore, one of India’s most renowned corporate giants – The Tata Group – has been
increasingly cementing its place in the southeast Asian country. Tata Power, the Group’s energy arm, has
taken on the task of building a US$ 2.2 billion thermal power project in the southern region of Vietnam by
2030, along with a US$ 54 million solar park in the Binh Phuoc province of the nation. Additionally, the
Tata group has also made significant commitments in Vietnam’s Agriculture sector, establishing a US$50
million freeze-dried coffee plant in Binh Duong province. Interestingly, the Tatas aren’t the only Indian
titans investing in Vietnam. Notably, the Shapoorji Pallonji Group too has established a presence in the
country. In July 2018, Shapoorji Pallonji Infrastructure Capital Company Ltd. Signed Vietnam’s first solar
power purchase agreement with the country’s Electric Power Trading Company. These examples indicate
a growing Indian footprint in the Vietnamese economy, and thus signal increasing future collaboration
between the two nations.
India’s increasing interest in the ASEAN region will certainly offer tremendous opportunities for growth.
What remains to be seen, however, is which ASEAN nation will jump at this opportunity first.