First mini free trade deal pact with an Indian state will likely be with Telangana whose capital in southern India is Hyderabad which is home to HITEC city which encapsulates the vision Thailand has for knitting the technology sector into the kingdom’s economy particularly with the government’s ambitious Eastern Economic Corridor project in Rayong, Chonburi and Chachoengsao.

The Chairman of the Thai-Indian Business Association, Satish Sehgal, has welcomed moves by Thailand to pursue separate free trade agreements with states on the Indian subcontinent and predicts that the growing and increasingly affluent Indian middle class could be the main staple and the biggest spenders in a relaunched foreign tourism industry when the country is expected to reopen its borders at the end of 2021.

thailand-in-direct-trade-talks-with-12-indian-states-boost-trade-tourism-industry
The Chairman of the Thai-Indian Business Association, Satish Sehgal (right) has enthusiastically welcomed news from the Ministry of Commerce and Minister Jurin Laksanawisit (centre) that a trade deal with the southern Indian state of Telangana should be inked before the end of March 2021 and that possible deals with 11 more Indian states are in the pipeline. Thailand enjoys a substantial and growing trade relationship with India. This deal will help Thai economic planners get over the disappointment of 2019 when Indian Prime Minister Narendra Modi (centre top) pulled his country out of the Regional Comprehensive Economic Partnership which was formalised last month at a virtual summit hosted by Hanoi. Hyderabad is the capital of Telangana state and a key world centre for information technology, a business sector that Thailand is keen to partner with India on.

Thailand’s Ministry of Commerce has revealed that it is pursuing a free trade deal with the Indian state of Telangana in southern India whose capital is the city of Hyderabad.

The discussions were confirmed by Minister of Commerce, Jurin Laksanawisit, who indicated that the agreement is expected to be signed at the end of March 2021.

The significance of the move was highlighted by Mr Jurin at the end of the week: ‘India has a population of 1.3 billion people and its GDP is the world’s fifth-largest. It is Thailand’s largest trade partner in South Asia,’ he told the press.

Minister confirms that Thailand is talking with up to 11 other Indian states about further free trade deals

‘Earlier we had negotiated an FTA with India involving trade valued at ฿10.12 billion. However, so far only 60 per cent of the trade target has been achieved due to lockdown restrictions during the Covid-19 outbreak.’

In confirming the mini trade deal, the minister has suggested that at least 11 similar deals were also in the pipeline including pacts with Gujarat, Karnataka, Maharashtra and Kerala.

‘Next year we expect to sign a mini-FTA with India’s Telangana state and later will expand to signing with other states, such as Gujarat, Karnataka, Maharashtra, Kerala and seven sister states in India’s northeastern region,’ the minister confirmed. ‘This will help Thai entrepreneurs in penetrating India’s market at the regional level.’

India has 29 states and 7 territories which are part of the Union.

It is understood that these are tailor-made free trade agreements taking into account each state’s particular economy and examining the opportunities that exist between each state and the Kingdom of Thailand for symmetries, increased trade and prosperity to benefit both parties to the agreement while protecting vulnerable industries and sectors in both countries.

India is historically a Thai business partner

Although Thailand and India have only had diplomatic relations since the huge country’s independence from Britain in 1947, the subcontinent and Thailand have a shared culture going back to ancient times which includes a strong Indian influence.

Indeed, Indian merchants brought Brahmanism to Thailand which is today at the heart of Thai culture.

Even in more modern times cooperation and trade between the two countries have been taking off. Between 2016 to 2019, trade between India and Thailand rose 60%. Figures for 2018 show $12.46 billion or nearly ฿400 billion worth of trade between the two economies.

61% of this trade was Thai exports to India.

Growing middle-class population are a key and valuable target for Thailand’s tourism industry says Business Association Chief  Satish Sehgal

The potential for increased trade links with India, historically a key business and trading partner with Thailand, was made clear by Satish Sehgal who is the Chairman of the Thai-Indian Business Association.

‘Out of over 1.3 billion population, more than 300 million are classified as middle-class, or about five times the Thai population,’ Mr Satish explained. He also made it clear that India must become a key growth area and target for Thailand’s efforts in the future to relaunch its foreign tourism industry. 

‘Indians like to organise their weddings in Thailand’

‘Indians like to organise their weddings in Thailand, where they could spend up to ฿25 million per event, while Indian tourists usually spend around ฿100,000 to ฿1 million per person in Thailand,’ he pointed out.

Thailand is expected to reopen its borders to mass-market tourism at the end of 2021 based on current plans assuming a vaccination programme being implemented and running smoothly throughout the kingdom in the latter half of the year and that there is both a resumption of the international flight network with an effective security protocol against the Covid 19 virus which could well involve vaccine passports such as that which will be trialled by IATA in the first few months of 2021 and which major airlines are thought to be advocating.

Mr Satish suggested that the policy of individual trade deals with Indian states will yield greater economic returns for the kingdom than the current broader agreements currently in place.

Thailand has long pushed for more trade between the two countries ever since Thaksin’s time

A free trade agreement with India was first promoted in 2001 and pushed by Prime Minister Thaksin Shinawatra who came to power that year. 

A limited free trade deal came into effect in early 2004 covering 900 specific types of Thai products and merchandise.

The agreement was limited in scope and ambition while only providing for a tariff reduction of 50%.

The kingdom has also had access to the Indian market through other free trade agreements negotiated between India and the 10 member ASEAN group of nations in the last decade.

Thailand has, in that period, pushed hard for greater access to India’s vast marketplace but Indian authorities have been cautious.

India pulled out of the Regional Comprehensive Economic Partnership (RCEP) trade deal at the Bangkok ASEAN Summit in November 2019

In November 2019, India pulled out of the Regional Comprehensive Economic Partnership during final negotiations at the ASEAN Summit in Bangkok and was not a part of the huge free trade deal which was signed this November, at a virtual summit hosted by Hanoi, by the 10 nation ASEAN bloc as well as China, Japan, South Korea, Australia and New Zealand. 

This was the world’s largest free trade deal.

India pulled out of the pact because it’s Prime Minister, Narendra Modi, felt he could not allow market access to cheap products from China and other more developed economies that would have devastated smaller producers and manufacturers on the Indian subcontinent.

Hyderabad a key Indian technological centre

Thailand was keen in having India as a partner to that agreement not only to open access to India for Thai exporters but to give the trade agreement more balance as, since last year, many analysts have portrayed the RCEP as a move towards growing Chinese hegemony in the Asia Pacific. 

The original makeup would also have allowed the kingdom access to India’s huge IT and technology sector which Thai economic planners saw as a golden opportunity.

Hyderabad, the capital of Telangana, is a technology centre in India that not only attracts world-class firms but also has extensive research and development infrastructure as well as a financial services industry to support its growing range of technology enterprises.

It is the home to HITECH City which stands for Hyderabad Information Technology and Engineering Consultancy City, a complex on 200 acres of land spread across the suburbs of Hyderabad.

The city is home to such household names as Bank of America, Microsoft, Verizon, Amazon, Qualcomm, JP Morgan, Novartis and Thomson Reuters.

HITEC city is an example of the vision that Thai planners foresee for its flagship Eastern Economic Corridor project in the three eastern provinces of Rayong, Chonburi and Chachoengsao as the kingdom’s economic planners push forward with the Thailand 4.0 agenda and plans to transform the economy into a high-tech, high-income one.

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