General Secretary and President To Lam’s visit to India opens up opportunities to boost bilateral trade, aiming for a target of US$25 billion by 2030.
During his official visit to India (May 5-7), General Secretary and President To Lam’s final stop was Mumbai – the financial and commercial center of the South Asian nation. This demonstrates that trade is a key pillar in the partnership between the two countries.
The visit also marks a significant milestone as Vietnam and India upgrade their relationship to an Enhanced Comprehensive Strategic Partnership, with the goal of increasing bilateral trade to US$25 billion by 2030, a 1.5-fold increase from the current level.
Opportunities from a huge consumer market.
Over the past decade, Vietnam-India trade has increased from $5 billion in 2016 to $16.4 billion, more than tripling. However, the Indian Ambassador to Vietnam, Tshering W. Sherpa, noted that this figure “represents less than 2% of each country’s respective total global trade, quite a contrast given that both are among the world’s fastest-growing economies.”
Agricultural products clearly illustrate the gap between potential and reality. Mr. Dang Phuc Nguyen, Secretary General of the Vietnam Fruit and Vegetable Association, describes India as a “very large market” with a population of 1.4 billion and a rapidly growing middle class of approximately 500 million people. However, Vietnamese fruit and vegetable exports to this market currently only amount to about 50-100 million USD per year.
According to him, the main reason is tariff barriers. He analyzed that currently only dragon fruit enjoys a preferential tariff rate of about 10%, while many other fruits are subject to tariffs of 40-50%. Vietnam also does not yet have a separate free trade agreement with India.
These long-standing trade barriers could be removed, as in the joint statement following the visit, leaders of the two countries agreed to facilitate easier access for each other’s markets, including agricultural products. India will open its market to Vietnamese durian and address technical issues to further open its market to Vietnamese pomelo. Vietnam is doing the same with Indian grapes.
On a broader trade level, the two countries also agreed to promote a review of the ASEAN-India Free Trade Agreement (AIFTA), increase supply chain connectivity in areas of common interest, and expand cooperation in e-commerce and the digital economy.
Strengthening investment between the two countries.
In Mumbai, many large Indian corporations expressed their desire to expand their presence in Vietnam. Larsen & Toubro and Adani are interested in transportation, energy, and port projects. ONGC – a major Indian oil and gas company with nearly 40 years of presence in Vietnam – wants to continue as a long-term strategic partner in the oil and gas industry and ensure energy security.
Energy, high technology, electric vehicles, and innovation are all new and key areas where Vietnam and India will promote cooperation and investment in the coming time.
However, experts assess that realizing the potential for cooperation still faces many challenges. Despite being seen as an attractive destination, Indian investors rank only 26th out of 154 countries and territories investing heavily in Vietnam.
