Global Rice News

India’s Act East Policy: Boosting Economic and Trade Relationships in the Asia-Pacific

As tensions between Israel and Hamas continue to disrupt the Middle East, it is crucial for New Delhi to consider alternative strategies, particularly its Act East policy. This policy aims to strengthen India’s strategic and trade ties with countries in the Asia-Pacific, East Asian, and Southeast Asian regions, including Japan, South Korea, and the ASEAN.

The Asia-Pacific region has long thrived on trade-driven development, as evidenced by the high-income status achieved by Japan and South Korea through export-oriented strategies. Additionally, emerging economies in the region, including India, contribute significantly to global goods and services. With China as a member of key trade organizations such as the Regional Comprehensive Economic Partnership (RCEP) and Asia-Pacific Economic Cooperation (APEC), these countries adopt a dual strategy of countering China while recognizing the importance of its economic growth.

However, recent global events, such as the pandemic-induced disruption of supply chains, Russia’s conflict in Ukraine, and potential prolonged conflicts in the Middle East, have raised concerns about the stability of these economies. As a result, there is a growing focus on trade integration within the region itself, with intra-regional trade accounting for more than half of East Asia’s export growth in the past decade.

East Asian countries have strategically lowered barriers to regional trade, including non-tariff barriers, especially for digital goods. This approach aims to diversify supply chains and protect against uncertainties in global trade. Consequently, consumer demand within East Asian countries has grown significantly, with China surpassing the US and the EU as the largest customer. The region views stronger intra-regional trade and economic integration as essential for sustaining growth and navigating global trade dynamics.

India, although not a member of the RCEP, APEC, or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), has the opportunity to benefit from joining APEC. Membership could lead to increased investment opportunities and market access for India, while aligning with APEC’s trade procedures and regulations could boost exports, attract foreign direct investment, and support domestic initiatives like Make in India. Additionally, investing in the ASEAN, a leading recipient of foreign direct investment in developing regions, could further enhance India’s trade prospects.

While countries in the region may have different political systems and attitudes towards China and the US, they continue to invest in one another’s economies. The expanding consumer markets in the Asia-Pacific region present significant opportunities for continued growth and domestic job creation, which can act as a buffer during global economic crises. Efforts to lower non-tariff barriers, particularly in digital services, also contribute to deeper regional integration and sustained economic development.

India must also address concerns raised by trading partners like Japan regarding increased protectionism in recent years. By liberalizing its economy and integrating with global supply chains, India can position itself as a reliable investment destination and leverage the China-Plus-One strategy to diversify businesses away from overreliance on China.

India’s successful integration into global supply chains would not only enhance its economic prospects but also bolster its strategic position in the region. By actively pursuing its Act East policy, India can strengthen its economic and trade relationships within the Asia-Pacific and position itself as a key player in the region’s growth story.

Source: Financial Express