Given India’s competitive advantage in services—a Deloitte study puts India’s revealed comparative advantage index in all services at between 1.5 and 2 as compared to a number between 0.5 and 1 for Asean nations and China—the successful conclusion of an Indo-Asean dialogue to include a pact in services as well as investments is a very big positive. The exact details are not known as yet since the formal signing has not taken place, but Indian officials announced that a deal had been reached on Thursday. India’s long-held position, in both multilateral and bilateral talks, has been that the opening up of Indian markets would be contingent upon it getting access to global services markets including through the movement of Indian professionals. Of course, this goes both ways and India cannot stop, say, Singapore lawyers from practising in Indian courts while wanting Singapore to allow India’s IT professionals to be allowed to work in Singapore. Asean is a big importer of services and, in 2011, imported $262 billion of services as compared to its services exports of $253 billion.
In the medium term, Indian manufacturing will have to get quite competitive. As per the agreement, when the FTA gets fully functional in 2016, tariffs will be eliminated on 80% of traded items in a phased manner, tariffs on 10% of items (sensitive items) will not be touched and the tariffs on the rest will be brought down to 5%. While India can be more competitive in chemicals and pharmaceuticals and mineral fuels,