Ample space for flourishing trade between Vietnam and India

Large Indian firms are increasing cooperation with Vietnam in strategic fields such as renewable energy, processing industry, oil and gas, pharmaceuticals manufacturing, seaport infrastructure, and logistics.

Meanwhile, Vietnam’s leading electric vehicle manufacturer Vinfast has started construction of an automobile assembly and production factory in India’s Tamil Nadu state with a total capital of US$2 billion.

Growing trade ties

The Ministry of Industry and Trade says India is currently Vietnam’s most important economic partner in South Asia and the eighth largest trade partner globally. Notably, bilateral trade turnover accounts for about 80% of Vietnam’s total trade turnover with other South Asian countries.

Statistics show two-way trade turnover between Vietnam and India has increased twofold to nearly US$15 billion last year since the two countries upgraded their relationship to a level of comprehensive strategic partnership in 2016. The first six months of 2024 saw bilateral trade rise 2% year on year to US$7.18 billion.

Major Vietnamese export items include computers and electronics, mobile phones and accessories, machinery and equipment, steel and other metals, chemicals, footwear, garments, rubber, and wood products. Its major imports are technical goods, agricultural products (including meat and seafood), chemicals and pharmaceuticals, electronics, minerals, cotton and textiles, and plastics.

Notably, Vietnam is the largest supplier of cinnamon to India, as it shipped 32,650 tonnes to this South Asian market in the 2022-2023 fiscal year, making up 85% of India’s cinnamon imports. It is also the fourth largest supplier of pepper to India, as it sold 6,813 tonnes worth US$28 million, up 46/5% in volume and 90.6% in value.

Trade yet to match potential

Though bilateral trade is on the rise, it is yet to match the two countries’ potential, as both Vietnam and India enjoy steady economic growth and have a stable macroeconomic environment, making them attractive destinations for foreign investors, according to MoIT experts.

India is the most populous economy in the world, a market of more than 1.4 billion consumers, while Vietnam is also a large market of more than 100 million consumers, ranking third in Southeast Asia after Indonesia and the Philippines.

The International Monetary Fund (IMF) has forecast that the Vietnamese economy would expand nearly 6% this year. The country has maintained steady economic growth and macroeconomic stability that are extremely important factors in facilitating business cooperation between Vietnam and India.

The two sides have resumed direct flights connecting Vietnamese localities such as Hanoi, Ho Chi Minh and Da Nang with many Indian destinations such as New Delhi and Mumbai, with a frequency of nearly 50 flights a week, helping to boost tourism and trade cooperation.

However, Vietnamese exports to India only account for 2.1% of its exports globally, while its imports from India make up only 1.97% of its imports globally.

India has adopted a series of trade restrictions against imports from Vietnam, causing negative impacts and disrupting trade exchanges between the two countries’ businesses.

While the two countries’ export goods have a quite similar structure, India’s tough trade protection policy has creating a major competitive challenge between the two countries’ export goods in the market, according to MoIT experts.

Huge potential for cooperation

The experts suggest that businesses eye new development fields such as green economy, circular economy, digital transformation, software industry, semiconductors, and artificial intelligence.

Accordingly, Vietnam can promote the export of high-quality agricultural and aquatic products to India, including processed and fresh fruits, tea, coffee, spices, cereals, and pangasius fish. In turn, India can increase the supply of textile and footwear raw materials; and components and spare parts for Vietnam’s mobile phone, electronics and mechanical manufacturing industries.

In addition, businesses of the two countries can increase investment cooperation in electronics, semiconductors, and information technology; metallurgy; building materials; supporting industry; food processing; and pharmaceuticals manufacturing. These are all industries in which India has experience and development strengths, and Vietnam is in dire need of in order to develop and engage more deeply in the global supply chain.

To gain a firm foothold in the Indian market, experts also recommend that Vietnamese businesses should learn more about India’s business culture, including a good command of English and bargaining, along with business etiquette.