India and Vietnam Set to Strengthen Economic Ties during New Period of Bilateral Cooperation

September 25, 2015 Posted by India Briefing Reading Time: 4 minutes

India and Vietnam are poised to strengthen their relations to the best they have been in decades thanks to recent political shifts and policy developments.

Modi’s government has shown that it views Vietnam as an essential partner moving forward into 2016. India recently hosted a large celebration of Vietnam’s National Day in Delhi on 28 August at which several high-ranking members of Vietnam’s government attended. Included in attendance were Prime Minister Modi, national ambassadors for both sides, India’s national security advisor, Ajit Doval, Minister of State External Affairs V. K. Singh and several influential retired generals. This year’s National Day function in Delhi was notably ramped up in size and scale from prior years, and the inclusion of such officials shows a keen change in sentiment in India politics – one warmer and more welcoming of foreign investment.

This more inclusive tone from India at Vietnam’s National Day celebrations is also in line with Modi’s recent rhetoric and policies regarding foreign investment into the country. India has been keeping a closer ear to foreign businesses’ opinions and concerns and has made strides to address these through their Make in India campaign – reactions to which have been overall quite positive, although the long terms effects of the project have yet to be fully realized.

Along with these political shifts, India has increased the amount of active projects with Vietnam in recent years and has plans to expand these further. Current Indian investment into Vietnam totals almost USD$1 billion; both sides have also recently agreed on a new bilateral trade target of US$15 billion by the year 2020.

A large portion of this investment is also due to the two countries’ recent cooperation on defense procurement. India President Mukherjee recently stated that “cooperation in national defense was an important pillar in [India’s and Vietnam’s] strategic partnership.” To that end, the two countries recently signed a line of credit worth US$100 million allocated to defense – a point of cooperation that should not be overlooked when analyzing the two countries’ bilateral relations.

Of all ASEAN countries, Vietnam was by far the star performer in Quarter 3 of 2015, according to Dun & Bradstreet’s ASEAN Business Optimism Index. Five of the six measured parameters rose in that quarter alone. As such, India’s recent warming to Vietnam – both politically and economically – is a promising sign for foreign investors alike both in Asia and worldwide.

The ASEAN Business Optimism Index, released every quarter by Dun & Bradstreet, is considered a leading economic indicator for turning points in business activity and measuring business sentiment. The Index captures business expectations for the quarter ahead based on six parameters: sales volume, net profit, selling price, new orders, inventory, and employment. Sampling in the Index represents key business sectors including manufacturing, construction, wholesale, transportation, services, finance, mining and agriculture, according to their GDP contribution in each nation.

The ASEAN Business Optimism Index for Q3 2015 is out now and available as a complimentary download in the Asia Briefing Bookstore.

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