LOOK EAST POLICY AND SOUTH EAST ASIAN

ECONOMIC INTEGRATION

South East Asia has been the fastest growing region in the world for the past three
decades where the newly industrializing economies of South East Asia have been formed as the
models of accomplishment for other emerging economies. Over the years, regional economic
integration has been adopted as a strategy for development in different parts of the world. In the
recent past, South East Asian countries have also recognized this potential of regional economic
integration and at the same time, the economic reorganization and liberalization have paved
India’s rapid economic growth and international economic relations. Looking these, India has
adopted ‘Look East’ policy’ (LEP) to promote economic integration with East Asia which
provide an opportunity to economic transformation and growth to its lagging regions particularly
the North Eastern states which can help India to shape an Asian economic integration. It also has
made the East Asian region the country’s largest trade partner which bring several economic
prospects and threats to India in general and North Easter region in particular.
India is one of the fast rising counties in the world, growing a rate of more than 8
percent. Large population of India provides market to the countries of the world for which its
foreign trade should also replicate its potentials to materialize as a super power. India's effort to
gather speed of industrialization & improve international competitiveness received a boost up
with the declaration of the New Industrial Policy in July 1991. The Policy changes were planned
to draw sustained capital inflows into India which provided opportunities for growing weight
abroad, setting up the basis for a vague relationship with East Asia. But at the same time, the
value of India’s imports has increased because of rapid industrialization, policy of import
liberalization, within the country. However, the exports have not grown due to primary product
base, increased domestic consumption and inadequate export promotion measures etc. If we
have taken a closer look at the trade structure of India, we have to look at its regional trade
values and directions. This trend reflects the increasing exports and imports but exports not
matching with the imports. So, this increasing trade deficit should be a cause of concern for all
associated with the Look East Policy. In case of the direction of India’s foreign trade, Asia &
Oceania are major trading partner for India as far as exports are concerned. Major destinations
for Indian products within Asia region include China, Hong Kong, Japan, followed by China and
Singapore. The recent trend of direction of trade in India reflects that the main trade destination
of India is the European countries followed by the Asian Countries. Among the top 20 trading
partner countries of India, five Asian countries, get hold 23.52% Indian total trade of the world.
So there is the opportunity for India to strengthening the trade relation with South Asian
Countries. But before going for strengthening the trade relation there is need to closer look on
the trade deficit, direction and diversification of the foreign trade of India.
Foreign Direct Investment (FDI) is considered to be the most attractive type of capital
flow for emerging economies as it is expected to bring latest technology. However, India has
only very recently emerged as a destination for FDI since the pre-reform years were marked
with a sharp antipathy toward foreign capital. Over the period 1991-2000 FDI approvals varied
considerably over the geographical span of India. Four states namely Karnataka, Maharashtra,
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Tamil Nadu and Gujarat accounted for over one third of total FDI approvals. The shares of
Kerala, Haryana, Punjab and Rajasthan were comparatively smaller whereas the flow of FDI
into populous states such as NER, Bihar and Uttar Pradesh has been virtually negligible. In this
aspect, country-wise, FDI inflows to India are dominated by Mauritius followed by the United
States and Japan. As per the United Nations Conference on Trade and Development (UNCTAD)
report in assessing the impact of the current financial and economic crisis on global FDI flows
stated that India achieved a growth of 85.1 per cent in FDI inflows which was the highest
globally. India also ranked 9th in global FDI inflows in 2008. So there is the prospect of heavy
FDI inflow to India through the opening up of the East Corridor of India in the eve of the look
east policy. However, despite strong economic performance of India, that has lifted many out of
poverty, poverty rates have not come down substantially. Poverty is still widespread in India,
with 260 million people living on less than $US 1 dollar a day. Continuing widespread poverty
and high unemployment India’s trade liberalization is credited with contributing to only part
India’s economic growth. There have been high opportunities that further reforms to India’s
investment regime will lead to a significant rise in foreign direct investment, which in turn will
have a positive impact on India’s economic growth. The LEP is an integral part of India’s
reform package, and its implementation has resulted in the reorientation of India’s foreign
economic policy. The policy has had a significant impact on the country’s domestic
development, including the reform process.
In the recent past, India’s engagement with much of Asia, including South East and East
Asia, was built on an idealistic conception of Asian brotherhood, based on common experiences
of colonialism and of cultural ties. The pace of development of the NER is determined however,
as much by trade, investment and production as by history and culture which motivates Look
east policy. Thus the LEP signaled the end of India’s previous pursuit of self-reliant economic
development, and the start of an era in which India strived to take advantage of new
opportunities from international trade and investment. The LEP also sent a strapping signal that
East Asia would be integral to India’s economic aperture. The region would no longer be
overlooked, as it had been by India’s previous foreign economic policy, but would now be
regarded as a source of new business opportunity and inspiration for economic development.
Since 1997 when Myanmar was admitted into ASEAN as a full member, India's northeast
assumed importance in its LEP. This policy undoubtedly facilitated India's economic and
strategic relations with Southeast Asia but the share of the Northeast in this policy regime. This
policy holds the potential to make NER the commercial corridor of India linking the ASEAN
nations enabling its people to harvest economic well-being through trade, transit and tourism
from where NER will no longer in isolation and remoteness but prosper with business
opportunities knocking at the door. At the same time, India spends huge amount in transporting
food items like pulses, poultry products, grains etc to NER for which the people have to pay
more to meet the cost of transportation. Likewise, prices of all other items that come from the
neighborhood are higher in the region reducing the affordability of its people. Countries like
Myanmar and Thailand can provide many of the items at much cheaper price because of saving
in the cost of carriage. On the other hand, India–ASEAN economic relations improved over the
years, leading to multifaceted institutional arrangements being developed by the two sides.
India’s East Asia strategies have gradually moved away from solely focusing on ASEAN since
the early 2000s, with its warming relations with other East Asian economic powers, particularly
China and Japan.
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In conclusion, despite of the tremendous efforts, India currently has limited economic
integration with East Asia and has yet to become a significant market for most East Asian
economies. The insurgency problem has left the region unchanging in all aspect. Inefficient
bureaucratic processes are also perceived to limit India’s commitment to engage with East Asia.
Lastly, complex socio-cultural and ethnic frameworks in NER make hardship for rapid socio-
economic development of the region. Therefore, closer economic ties with East Asia require
greater effort on India’s part to liberalize trade and investment. India has increasingly turned its
focus to sustaining its rapid growth. Strong economic ties with East Asia would help India for
accessing growth opportunities in Asia. The Look East Policy is seemed as important policy
framework in dealing with internal disparity in India’s development. At the same time, the
economic development of India’s seven north-eastern states in particular lags behind the
nation’s development. Trade with South-East Asia also has the potential to turn the region from
land-locked to land linked, providing India with land routes to South-East Asian countries. In
this context a broader regional economic integration in Asia within the Indian framework could
be an engine of growth for not only the participating countries, but also has the potential to
enhance the welfare of the rest of the world by unleashing the synergies of Asian countries for
trade creation. The rise of India has introduced new dynamism in the process of South East
Asia’s economic integration. In this aspect by looking east, India has used the LEP to support
economic reforms and liberalization, sustain its rapid growth and promote equity-based
domestic development. But India needs to keep on eye the relative gain and lose and future
prospects of LEP and it needs to develop policy framework for looking at the sustainability of
inclusive growth and development of human resource of the NER.

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