India-ASEAN Economic Engagement

Abstract

The Look East Policy of India serves as instrumental in engaging the East and Southeast Asian countries in a wider perspective since 1991. The trade share of India with these countries which also makes noted trade bloc namely the Association of Southeast Asian Nations (ASEAN) has grown significantly because of pro-trade policies in the last decades. In this backdrop, this paper presents the facts on the dynamic impact of India's trade share with the East and Southeast Asian countries on the economic growth rate. The results show that the India-ASEAN trade share has a significant positive impact on India's GDP growth rate in the long run, while the impact is found significantly negative in the short run. The results raise the need for greater regional trade openness, hence highlighting the policy lessons and potential challenges on the part of the Free Trade Agreement (FTA) with the ASEAN countries. India tends to gain in the short run if it extends the scope of FTA from trade in goods to trade in services.