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Syed Munir Khasru
Syed Munir Khasru

Opinion | Can Modi’s third term bring India and Asean closer together?

  • The ‘Act East’ policy needs fine-tuning but is likely to remain a key part of India’s increasingly close ties with Southeast Asian nations

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Narendra Modi signs after taking the oath as India’s prime minister during the swearing-in ceremony at the presidential palace in New Delhi on June 9. Photo: EPA-EFE
Syed Munir Khasru
India’s recent general elections were spread out over the course of six weeks but still managed to provide a thrill. The results suggest the Indian voter decided to humble the mighty and restore balance.
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The victory for Prime Minister Narendra Modi, the Bharatiya Janata Party and its alliance partners has secured a mandate for political and economic reform, although they will have to engage in negotiations and are likely to face stronger opposition. Modi’s victory was widely expected, but needing a coalition to form a government was not.
As Modi begins his third term, India’s “Act East” policy is poised for a recalibration. New Delhi’s economic and strategic engagement with Southeast Asia saw an upswing during his first two terms, albeit with some shortcomings that require a course correction. Modi may now inject new vigour into this key foreign policy as India seeks to establish a stronger Indo-Pacific presence.

On the economic front, trade and investment links with Southeast Asian nations have received a major boost, with annual bilateral trade surging from around US$80 billion in 2014 to more than US$110 billion by 2021-22. However, the existing trade accord with the Association of Southeast Asian Nations – the Asean-India Free Trade Area – is seen as heavily favouring the Asean side, frustrating India.

India’s exports to Southeast Asia saw a moderate increase in the 2023 financial year, rising to US$44 billion from US$42.3 billion the previous year. Meanwhile, imports from Asean nations rose at a sharper pace, from US$68 billion to US$87.6 billion, resulting in a substantial trade deficit of US$43.6 billion for India. The need to address the trade imbalance is all the more pressing given that the trade deficit was just US$5 billion in 2011.

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On the other hand, the economic outreach to Asean nations under Modi’s government has been hampered by a reluctance to undertake market reforms and liberalise tariffs. This has led to frustration among several Southeast Asian states, leaving the economic dimension of Act East lagging behind the policy objectives.
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