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The India-Vietnam Trade Agreement: An Overview

In recent years, the India-Vietnam trade relationship has seen significant growth, with bilateral trade between the two countries tripling between 2010 and 2019. To further strengthen this relationship, the two nations signed a Free Trade Agreement (FTA) in August 2020. In this article, we will take a closer look at the India-Vietnam Trade Agreement and what it means for both countries.


Vietnam and India have had diplomatic relations since 1972, with India becoming one of the first countries to establish diplomatic ties with Vietnam after the end of the Vietnam War. Bilateral trade between the two nations has been growing steadily over the years, reaching $11.3 billion in 2019. India is Vietnam`s seventh largest trading partner globally, while Vietnam is India`s fourth largest trading partner in the ASEAN region.

Key Provisions of the India-Vietnam Trade Agreement

1. Tariff Reductions

Under the India-Vietnam Trade Agreement, both nations have agreed to reduce or eliminate tariffs on goods and services traded between them. Vietnam will eliminate tariffs on around 48.5% of all Indian exports immediately after the agreement comes into effect, while India will eliminate tariffs on around 40.3% of Vietnamese exports. These cuts in tariffs will make Indian goods and services more affordable for Vietnamese consumers, and vice versa.

2. Services and Investment

The agreement also includes provisions for the liberalization of services and investments in both countries. Indian companies will have greater access to the Vietnamese market in sectors such as IT and healthcare, while Vietnamese firms will have more opportunities in India`s pharmaceutical and agricultural sectors.

3. Rules of Origin

The agreement also includes rules of origin provisions, which dictate the country in which a product must be manufactured to qualify for preferential treatment. Only goods that meet the agreed-upon rules of origin will be eligible for tariff reductions.

4. Dispute Resolution

The India-Vietnam Trade Agreement includes a dispute resolution mechanism, which aims to settle any disputes that may arise between the two countries. The mechanism provides for consultations between the two parties, and if no resolution can be reached, the dispute may be referred to a panel for further review and resolution.

Benefits of the India-Vietnam Trade Agreement

The India-Vietnam Trade Agreement is expected to have several benefits for both nations. For India, it will provide greater access to the growing Vietnamese market, which is expected to become the world`s 20th largest economy by 2050. The agreement will also help India diversify its exports, reducing its reliance on traditional markets such as the US and Europe. For Vietnam, the agreement will provide greater access to India`s vast consumer market, which is expected to surpass that of China by 2030.


The India-Vietnam Trade Agreement marks a significant milestone in the economic relationship between the two countries. By reducing tariffs, liberalizing services and investment, and establishing a dispute resolution mechanism, the agreement will benefit both nations and help to strengthen their economic ties. While implementation of the agreement may face challenges, it is expected to promote greater economic integration between India and Vietnam, and boost trade and investment between the two nations.

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