SINGAPORE – India and Southeast Asia have complementary assets for a larger role in global manufacturing: a vast Indian market and engineering base, alongside ASEAN’s established suppliers, industrial clusters and export infrastructure. Turning those strengths into an integrated production network, however, will require governments to reconcile industrial ambitions with easier access to one another’s markets.
That is the central proposition of Eko Setiobudi’s October 30 commentary in India Narrative. As multinational companies diversify production beyond China, he argues, India and ASEAN should coordinate investment and supply chains. The proposal remains an analytical prescription; the sources reviewed establish no jointly adopted manufacturing strategy.
The Case for Connecting Factories
The economic rationale rests on an uneven starting point. A 2024 study by the Economic Research Institute for ASEAN and East Asia found that ASEAN was more deeply embedded in global value chains, while India’s participation had improved unevenly. Greater investment between the two could help connect their manufacturing capabilities.
The proposed division of activity would build on existing strengths: Indian design, engineering and industrial software; Malaysian semiconductors; Thai automotive manufacturing; Vietnamese electronics; and Indonesian battery materials. Electronics, electric-vehicle batteries, pharmaceuticals and machinery offer potential starting points.
A shared supply-chain map could identify missing suppliers and commercially viable links. Its practical value would depend on whether companies could move components across borders predictably, meet compatible standards and invest without recurring regulatory uncertainty. These are central elements of the commentary’s proposed approach.
Trade Politics Complicate the Vision
The commercial relationship already has considerable scale. India’s Commerce Ministry puts bilateral goods trade at $128.38 billion in the 2025–26 fiscal year. Yet New Delhi has also emphasized correcting trade imbalances. The Financial Express reported that India’s goods deficit with ASEAN reached $51.54 billion over that period. Together, those figures illustrate why deeper integration carries domestic political sensitivities.
The immediate test is the review of the ASEAN–India Trade in Goods Agreement. Negotiators meeting in Jakarta on October 6–9 ordered faster work on outstanding chapters, including market access and rules of origin. Another meeting is scheduled for January 2027, underscoring that important terms remain unsettled.
ASEAN governments and businesses have advanced practical measures. In September, Indonesia’s deputy trade minister, Dyah Roro Esti Widya Putri, welcomed business proposals for a digital trade pilot connecting ASEAN’s Single Window with India, supply-chain partnerships and easier business mobility. These proposals address the administrative costs that can undermine otherwise attractive investment opportunities.
A sharper critique came from Sandeep Bhardwaj of the National University of Singapore. Writing in The Diplomat on October 27, he argued that India’s defensive approach to the agreement had weakened its economic engagement with Southeast Asia. His analysis raises a difficult question: how far can a shared production strategy advance while market opening remains politically contentious?
China Remains Central
Diversification will also operate within supply chains that remain closely connected to China. ERIA’s research identifies continued ASEAN dependence on Chinese inputs. A broader India–ASEAN network would therefore likely develop alongside those relationships.
The international outlook reinforces the need for caution. The IMF’s October 2026 regional assessment describes strong technology demand supporting Asian growth, but also highlights uneven gains, energy disruption and continuing trade-policy shocks.
The implication is that factory investment alone offers an incomplete measure of success. India and ASEAN’s opportunity depends on building reliable supplier relationships, raising local value added and making cross-border production commercially routine. The decisive progress may come through customs systems, standards and investment rules—the less visible infrastructure of industrial competitiveness.
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