1. India Should Look Towards
East
GROUP: 10
Soumya Saxena(91055)
Stuti Gupta(91056)
Sudhir Makkar(91057)
Swagat Kumar(91058)
Sweta Agarawal(91059)
Varun Bansal(91060)

2. Our Group thinks :
Yes !!

3. Outline of the Presentation
Introduction
Review of literature
Evolution of Look east Policy
Factors driving LEP
Improving relations
Comparison between India and China
Different Trade Associations
Impact of LEP
Group’s views and issues to be resolved

4. Introduction
• Globalization: increase in trade, capital
movements and investments and people across
the borders
• 1991 (LPG applied): immense scope to
redefine its relations with its neighbours,
particularly ASEAN, via the Look East Policy.
• LEP’s philosophy: Economic interests are
best served by greater integration with East
and Southeast Asia

5. As Prime Minister Manmohan Singh said-
“ The Look East policy is not merely an external economic
policy. It is also a strategic shift in India’s vision of the world
and India’s place in the evolving global economy .”

6. Review of the Literature
Research Paper
“ India Looks East- Strategies And Impacts”
By: Dong Zhang, Asia Economic Section, Australian
Treasury, AusAID Public Affairs Group
 Four broad Objectives of LEP
 Impacts of LEP
 Obstacles to India

7. • REFORM AND LIBERALISATION:
• SUSTAINED RAPID GROWTH:
• REGIONAL ECONOMIC INTEGRATION:.
• EQUITY-BASED DEVELOPMENT:
Landlocked to land-linked, providing India with land routes to
Burma, Thailand and other peninsular South-East Asian countries.
Objectives of LEP

8. Impacts of India looking east
NEW SOURCES OF GROWTH : India’s trade with East Asia is now
25 per cent
IMPACTS ON ECONOMIC REFORM AND LIBERALISATION :
As India’s Prime Minister recalled in 2006:
When we first set the target of bringing India’s tariffs down to
‘ASEAN levels’, it was not just an exercise in tariff liberalisation
but an attempt to benchmark our economic performance against
some of the best performers in our neighbourhood.
(M Singh, ‘PM’s speech at the Asian corporate conference “Driving Global
Business: India’s New Priorities, Asia’s New Realities”’, Mumbai, 18 March
2006
http://pmindia.nic.in/speeches.htm)

9. IMPACTS ON INDIA’S SUBREGIONAL DEVELOPMENT STRATEGIES
INDIA’S IMPACT ON THE FORMATION OF AN ASIAN ECONOMIC
COMMUNITY
EAST ASIA EMBRACING INDIA :
country’s emerging status as an economic Superpower
huge consumer market
India opened up more import channels to ASEAN member
countries during the crisis
Some ASEAN member countries have adopted a policy of ‘Look
West’ to match India’s LEP.
ASEAN and India have many areas of common interest,
including information and communication technologies, public
health, medicine, trade, investment and agriculture.

10. OBSTACLES TO INDIA
Different economic structures and degrees of openness
ASEAN economies  more open Relying heavily on imports of raw
materials
Indian economy  Relying more on domestic inputs.
Image problem
 ASEAN countries believe India has
Indian traders are perceived to be ticklish to deal with and its trade
negotiators too tough.
Images are not necessarily accurate, but they affect decision-
making
For instance, Thailand thinks it is difficult to project its long-term
economic relations with India, while India feels ASEAN is a lot closer to
China than to India in terms of cultural affinity, managerial style and
business operation.

11. The areas of co-operation between India and these
countries include science and technology,
biotechnology, financial services, information
technology, human resources, education, transport and
tourism.
Likelihood of India’s economic interaction with China,
Japan and Korea which eventually would make it
possible to forge an Asian Economic Community on the
lines of European Union.
Research Paper:
“India and Globalization: Policy of look East and Beyond”
By : Sailaja Gullapalli, Indira Gandhi National Open University

12. Research paper
“ The Evolution of India–ASEAN Relations ”
By - TAN TAI YONG and SEE CHAK MUN
During the Cold War
 Political distance that India consciously kept from
the newly formed ASEAN
 Bilateral relations with individual countries rather
than with the association as a whole.
Now
 India’s trade : Risen from US$8 billion in 1990 to
US$67.6 billion in 2005( 30 percent of India’s total
external trade)
Singapore and Malaysia : Two major contributors
to bilateral trade between India and ASEAN.

13.  In contrast to China’s strategy of developing its
backward regions through greater economic ties
with ASEAN, India’s policy of strengthening its ties
with eastern neighbours has been limited to
counter insurgency efforts.
Research Paper
“ LOOK EAST, LOOK SOUTH: Backward Border Regions in India
and China ”
By : Sushil Khanna, IIM- Calcutta

14. Evolution of ‘The Look East Policy’
Narasimha Rao gave his Look East orientation to
India’s external policy
Divided in to two phases:
Phase 1
(1993-2002)
Phase 2
(2003-now)

15. First phase:
Focus on ASEAN (trade and investment linkages)
• From a sectoral dialogue partner in March 1993 to a
Summit Level Partnership in 2002.
Second phase: (From 2003)
Extending from Australia to East Asia, with ASEAN as
its core.
• “Long Term Cooperative Partnership for Peace and
Prosperity” with ASEAN
• Wider economic and security cooperation, political
partnerships, physical connectivity through road and
rail links

16. Factors driving the Look East policy
• Need to counter China economically
( Source: http://www.chinability.com/FDI.htm )
• An emerging middle class
( Source: http://www.dbresearch.com/PROD/DBR_INTERNET_EN-
PROD/PROD0000000000245808.pdf )
• Fear in a growing regional hegemony: the
race to project naval power in South East
Asian waters:

17. Improving relations due to LEP
• India and Singapore:
• India and Australia:
• India and Thailand
• India and Malaysia
• India and Indonesia
• India and Myanmar
• India and Cambodia, Laos and Vietnam

18. LEP
(Comparison between Phase 1 and 2)
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
Total Import from Australia (in
Crore)
Total Exports to Australia (in
Crore)
India and Australia
Source: Indiastat.com

19. 0
5000
10000
15000
20000
25000
30000
35000
40000
45000
Total Import from
Japan
Total Export to Japan (
in Crore)
India and Japan
Source : Indiastat.com
Japan : A Shortcoming of LEP

20. Comparison of India and China
regarding LEP
Source: Asia + India Trade Relations and Growth: Substantive Evidence and Implications for
Regional Economic Integration Policy
Note: X= Total Exports, IM= Total Imports, YCIN= India’s Annual Growth, YCCN= China’s
Annual Growth

21. Findings:
China:
• China’s imports from East Asia (between
1990–94 and 2000–04) : Remained roughly
same but its share of exports to East Asia
dropped from 60.5% to 45.3%
• China is becoming the ‘assembly factory’ for
East Asia, importing parts and components
from that region and selling finished products
to the rest of world.

22. India:
• Despite India’s increasing trade relations with
East Asia, its exports and imports to East Asia
account for only about one-quarter of its total
trade
( Source: www.jef.or.jp/PDF/Report.doc.doc )
• India has not yet proved to be a major force in
international manufacturing and it may choose
to follow China’s model to attract foreign
investment and beef up its manufacturing
industry

23. Current distinction
Between India and China
China as the ‘factory of the world’ and India
as the ‘world’s back office’ in international
trade

24. Different Associations
India and ASEAN
• Evolved relationship over the years
• The ASEAN–India Free Trade Area (AIFTA) is a free trade
area among the ten member states of the ASEAN and
India. The initial framework agreement was signed on 8
October 2003 in Bali, Indonesia.
• The free trade area came into effect on 1 January 2010

25. • Intra-ASEAN trade has increased from US$ 180.99 billion to
US$543.37 billion in 2008—an average annual increase of
18.6 per cent.
( Source: http://www.eastasiaforum.org/2009/10/02/india-
asean-fta/ )
• The India—ASEAN agreement may also strengthen the
Indian economy by reflecting positively on its trade in
goods. India—ASEAN trade was worth US$40 billion
during 2007-08, about a quarter that of Japan, China or the
EU’s trade volume with ASEAN.
( Source: http://www.eastasiaforum.org/2009/10/02/india-
asean-fta/ )
=> Scope of improvement.

26. India and APEC
• The region is likely to provide the main growth
springs in the global economy with over 40% of
global trade and more than half of world
production
• Unfortunately, India has been denied an entry
into APEC ever since the latter’s creation. India
has requested membership in APEC, and received
initial support from the United States, Japan and
Australia.
• Reason for Denying

27. ASEAN Economic Community (AEC)
• ASEAN has emphasised regional cooperation
in the “three pillars” of security, socio-cultural
and economic integration, aiming to create an
ASEAN Economic Community (AEC) by 2015.
( Source: http://www.asil.org/aseanevent/Sim_Intro_to_ASEAN.pdf)

28. Advantages of the Look East Policy
East Asia’s Strength
• Electronic Equipment
• Heavy Engineering
• Product Development and Marketing
• Underutilized capacity
India’s Strength
• Computer Software (Information Technology)
• Light Engineering and Pharmaceuticals
• Process Development
• Huge Potential Demand
 India gets support from Asian countries which have
increased India’s importance at global level.

29. Shortcomings in the Policy
• Failure to involve Japan and build economic
relationship with it resulted in closing the
doors on Japanese foreign direct
investment.
• India received just 2 per cent of Japanese
FDI (China's share was 10 times higher at 22
per cent)

30. Reasons for poor Implementation of FTA
• The Indian industry doubts about its competitive
efficiency and it does not want competition at
home.
• Cheap exports and costlier imports prevent Indian
industries from these countries.
Current Scenario:
India has entered into a number of pacts,
agreements and FTAs but its record for
implementation of such accords has been poor as
can be seen from the follow up of the Indo-Thai FTA
and CECA with Singapore.

31. Problems and Issues to be resolved for
better trade
• Limited economic integration with East Asia
• Restrictive policies towards FDI
Such investment to India tends to concentrated in the service and IT
sectors, which are often less capital intensive than the manufacturing
sector.
• Different economic structures and degrees of openness
ASEAN economies  more open Relying heavily on imports of raw
materials
Indian economy  Relying more on domestic inputs.
Mounting pressure from India’s business sector for protection has also
tied the hands of Indian trade negotiators

32. • Inefficient bureaucratic processes
ASEAN feels confused by India’s political system of
central and state governments.
Currently:
ASEAN now has insisted that any FTA signed with
India should commit both its central government
and its state governments
India has accepted this, although the effectiveness
of its commitment is not yet tested and is
questionable.

33. Group’s views
India has made itself a ‘member’ of the emerging Asian
economic community but yet to become a significant market for
most East Asian economies.
Need of the Hour
• Strong links with East Asia through a web of engagements at
bilateral and regional levels.
• Proper implementation of FTA
• Strong political will power and better cooperation between
central and state governments.
• Further trial to become a member of APEC
• Strengthening relationship with East- Asia neighbors ( China,
Bhutan etc.)

34. Strong links with East Asia through a web of
engagements at bilateral and regional levels.
Source
o The bilateral trade between India and the ten-
member ASEAN now stands at US$ 48 billion
annually.
o Indo-ASEAN trade, which has been growing at
a compounded annual growth rate (CAGR) of
27 per cent since 2000, stood at US$ 38.37
billion in 2007-08
o Need for further improvement.
http://www.ibef.org/india/indiaasean.aspx

35. Proper implementation of FTA
Source:
• India has Free Trade Agreement (FTA) with Thailand, Sri
Lanka, South Korea
• Cooperation Agreement (CECA) with Singapore and Japan
• India is a signatory to the Bangkok Agreement
• Negotiations for a possible FTA with China and Australia are
also on the cards.
Recent:
The India-ASEAN Free Trade Agreement was finally signed, on
13 August 2009 at Bangkok, after six years of negotiations :
First multilateral agreement entered into by India.
http://www.cacci.org.tw/Journal/2008%20Vol%201/Modi-Speech.pdf

36. Strong political will power and better cooperation between
central and state governments.
The case of POSCO : South Korean Steel giant
Source:
 After several rounds of discussions between POSCO and the Orissa
Government, the MoU was finally signed, clearing the way for the largest
foreign investment ever in India.
 As per the MoU, Government of Orissa was supposed to recommend to
the Central Government and facilitate granting of SEZ status as required
by the company.
 When POSCO requested grant of SEZ status, state government found it
difficult to keep this promise, as the Centre did not seem to be too lenient
with POSCO on SEZ.
http://www.icmrindia.org/CaseStudies/catalogue/Business%20Strategy3/BSTA130.htm

37. Further trial to become a member of APEC
Source:
• Western countries are behind moves to keep India
out of an Asia-Pacific grouping because they are
concerned that its entry would tip the balance of
power towards Asia.
Source:
• India should put forth two points while demanding
APEC membership:
a) Strong demographic complementarities
b) Ever growing strong economic linkages
http://afp.google.com/article/ALeqM5hZoirSNiHlYD3ZRa5JhKVsPbnKrA
India’s Membership: APEC’s Relevance by Mukul G. Asher and Rahul Sen

38. Strengthening relationship with East- Asia
neighbors ( For ex. China )
2009 EXPORTS IMPORTS BALANCE
TRADE 128977.7 176537.0 -47539.4
US Trade with Mexico (NAFTA)
NOTE: All figures are in millions of U.S. dollars
Source: http://www.census.gov/foreign-trade/balance/c2010.html#2009
India trade with China
While international trade has been growing at around 15%
on an average, India-China trade has increased by more than
50% annually in the last five years. In 2008, China became
India's largest trading partner and the bilateral trade
between the two countries touched US$ 51.8 billion ( US $
51800 million)
Source: http://www.indiachina.org/trade_statistics.htm

39. Thank You !!!!