Apart from Taiwan, New Delhi is being courted aggressively by Singapore, Indonesia and Vietnam to boost trade volumes and to invest in ASEAN.
Leveraging its growing economic clout worldwide and backed by a strong diplomatic image boasting strategic ties with the United States and top global powers, New Delhi is out to play the “Great Game” in Asia. India’s “Act East Policy” is looking to expand and strengthen its trade and business partnerships in Asia. Business and trade experts see this as a strategic move to counter China’s dominance in the regional supply chain matrix, and allow other Asian nations to minimize their dominance on Beijing. If reports in business circles are to be believed, countries like Taiwan, Singapore and Vietnam are boosting their trade volumes with India, while countries like Indonesia are seeking more investments. The two-way increase in trade and investments has been significant since 2020, with the Covid-19 pandemic outbreak and with India snapping ties with China after the border clashes at Galwan. Amid this, India’s G20 presidency this year is adding a special edge to India’s efforts.
According to latest media reports, India has increased its chip imports from Taiwan, which supplies around 60% of the world’s semiconductors, including some of the most technologically advanced. According to Taiwan’s official ministry sources, India imported about US$5.32 billion worth of goods from Taiwan in 2022, which is up from US$4.52 billion in 2021 and US$2.6 billion in 2020. India is also wooing Taiwan to build its manufacturing base in Gujarat, which will make other Asian nations look to India for stretching the business profile. Trade and strategic experts feel that this was bound to happen as India is looking to realize its “Act East Policy” as far as Japan and South Korea and be a power in the Indo-Pacific and ASEAN region.
The time is ripe for India to make inroads, but it will have to make some adjustments to win new markets and trading partners, feel trade and business experts on India, Richard M. Rossow of the Center for Strategic and International Studies (CSIS) in Washington, DC. Talking to The Sunday Guardian, Rossow said: “There is a mix of competition and cooperation evolving among Asian nations. India and others hope to win significant new investments from multinationals looking to diversify manufacturing away from China. But the region is signing new trade agreements and looking at other ways to diversify their own trading partnerships.”
USISPF’s President and CEO, Mukesh Aghi sees the current geopolitics suitable for India to aggressively pursue its “Act East Policy” and “Indo-Pacific Policy” and seize the moment.
Talking to The Sunday Guardian, Aghi said: “Since Prime Minister Modi took office in 2014, there has been a concerted effort to transform the Look East policy to one of Act East, forging stronger relations with Southeast Asia, both in trade and maritime connectivity and strengthening the cultural bonds. The Trump administration brought the Indo-Pacific to the forefront and the security aspect of a free and open Indo-Pacific makes Southeast Asia a geopolitical focus.”
The region has economic heft with Singapore’s tech prowess, Vietnam’s manufacturing potential, and Indonesia and Australia (in the Oceania region), as fellow G20 nations with their robust economic potential, says Aghi.
True, apart from Taiwan, New Delhi is being courted aggressively by Singapore, Indonesia and Vietnam to boost trade volumes and to invest in ASEAN. These Asian countries are strategic from the point of India-China rivalry in the region. Singapore is India’s top business and trade partner. India-Vietnam trade too has seen a rise in bilateral trade in 2022, mostly with India importing mobile phones and accessories worth US$1.5 billion, according to official figures. In return, Vietnam imported over $7 billion worth of goods from India in the same year, an increase of 2% from a year earlier, with iron, steel, machinery, equipment and ordinary metals being its major import commodities. There is room for larger trade between the two, admit the two nations’ trade representatives. There is still a big scope to expand business ties in renewable energy, oil and gas, information technology, digital economy, and pharmaceuticals. Besides, the existing cooperation fields such as tourism, culture, defence, security, and financial technology need more strengthening.
Aghi sees a potential to leverage India’s growing strategic relations with Asian neighbours like Japan and Taiwan. “The two have dominated the high-tech manufacturing landscape. The synergy is also strong with Japan and Australia as fellow Quad partners, as maritime connectivity and supply chain rebuilding remain a core focus. Together, this growing business network in the Indo-Pacific with the United States as a core member, albeit geographically distant from the region, is a strategic move to counter China’s geopolitical hegemony”, says the USISPF President.
Satoru Nagao, Non-Resident Fellow at Hudson Institute explains the local geopolitics and how India fits well into that business of opportunities. Nagao told The Sunday Guardian, “Recently, under the ‘Indo-Pacific plan’ and ‘Act East Policy’, India is focusing on trade with Southeast and Northeast Asia. The view from a strategic and economic background, there are three reasons to do that. Firstly, because of escalating US-China competition, many countries in this region have started to reduce their dependence on China. They want to relocate their factories. In this case, India could be the place of relocation from China. And they also want to diversify their supply chain and reduce their dependence to China. Secondly, because of India’s cooperation with Japan, infrastructure to connect between India and Southeast Asia (ports, airports, road connection through Northeast India to Vietnam) has been developed well. Now, it is easier to expand their trade. Thirdly, there are very important critical technologies in the East.”
The third fact, says Nagao, is key as nearly 90% of advanced microchip production relies on Taiwan. “If China blockades Taiwan, most countries in the world cannot get chips. Thus, Taiwan has the will to diversify the locations of chip factories. The US, Japan, and Europe factories are nearly fixed. And India is also negotiating with Taiwan to set up factories in Gujarat. For India, the chip factories will be the first such type of industry, and will be a strategic business move in Asian markets,” says Nagao.
But the growth of India to tap into Asian trade and business will also require strengthening of its manufacturing sector, something India has been lagging behind in comparison to China. Rossow says, “India desperately needs to trigger a stronger manufacturing economy. Hundreds of millions of agriculture workers will continue migrating to cities. Securing significant manufacturing investments will become increasingly important—not just for the balance of trade, but for social cohesion.”
It will be interesting to see how all this will affect the Indo-Pacific region, with India out to flex its economic clout in the region, which has been predominantly China-dominated. This answer is hard to predict, says Rossow. “But if India’s Central government continues reforming, augmented by an acceleration of state-level reforms, India can continue to out-perform China›s economy. This shift will accelerate if America›s ‘decoupling’, at least in areas of strategic commercial trade, is enjoined by other nations,” says Rossow.
Rightly, echoes Aghi: “This is the most opportune period to consolidate India’s relations and thereby following Prime Minister Modi’s Neighbourhood First policy.”
That sounds like music for New Delhi, but a lot would be needed on ground to make it happen.