As India and Singapore prepare to celebrate the 60th anniversary of their diplomatic relations in 2025, the bilateral economic and trade relationship between the two countries stands as a remarkable model of cooperation, underpinned by decades of mutual trust and strategic alignment. Prime Minister Narendra Modi’s recent visit to Singapore added further momentum to this enduring partnership, marked by the elevation of ties to a Comprehensive Strategic Partnership.
The Comprehensive Economic Cooperation Agreement (CECA) signed in 2005 marked a pivotal moment, accelerating trade and investment. By 2023-24, bilateral trade had surged from US $6.7 billion in FY05 to over US $35.6 billion in FY24. Singapore is India’s largest trade partner within ASEAN and serves as a gateway to Southeast Asian markets, collectively worth about US $3.6 trillion.
Over the past decade, the economic dynamics between India and Singapore have experienced significant turbulence, particularly in their bilateral trade relations. From 2015-16 to 2023-24, the value of exports from India to Singapore steadily increased, peaking at US $14.41 billion in 2023-24. However, the import figures tell a contrasting story, with a dramatic surge in Singapore’s exports to India, climbing from US $7.31 billion in 2015-16 to US $23.60 billion in 2022-23. This shift has resulted in a marked and growing trade deficit for India, escalating from a modest US $411 million surplus in 2015-16 to a staggering US $11.60 billion deficit in 2022-23. Such a pronounced imbalance in trade highlights the increasingly skewed nature of this economic relationship, urging policymakers to reconsider the structural underpinnings of this bilateral exchange and explore avenues to bolster India’s export competitiveness while managing the influx of imports from Singapore.
Going forward, the most critical focus will be on bolstering India’s competitive edge in technology-driven sectors such as information technology (IT), pharmaceuticals, and renewable energy. Simultaneously, sectors such as electronics, petrochemicals, and machinery, which have seen a sharp rise in imports from Singapore, will demand a judicious policy mix of import substitution and increased domestic production capacity. By focusing on these pivotal areas, India can recalibrate this bilateral exchange, transforming the current deficit into a more equitable and mutually beneficial trade relationship.
India’s evolving approach with Singapore is discernible by the significant inflow of Singaporean capital, particularly in the burgeoning field of IT. In 2023-24, despite a global contraction in foreign direct investment (FDI) inflows by approximately 3.5%, India continued to receive the largest share of its overseas capital from Singapore, according to the latest government data. While FDI from Singapore witnessed a notable decline of 31.55%, amounting to US $11.77 billion, it still represented the most substantial investment source for India. This trend stresses on Singapore’s enduring confidence in India’s economic prospects, even amidst prevailing global economic uncertainties. Singaporean tech companies and venture capitalists have increasingly sought to capitalise on India’s dynamic digital ecosystem, infusing substantial resources into IT infrastructure, fintech, and artificial intelligence (AI). This investment surge not only reflects Singapore’s confidence in India’s capacity to emerge as a global technology hub but also aligns with India’s broader vision of becoming a digital-first economy. The symbiotic relationship forged between the two nations in this domain underscores the importance of IT as a fulcrum of their economic cooperation, offering a template for other sectors to follow in recalibrating the balance of trade and investment flows.
As India and Singapore move towards celebrating six decades of bilateral relations next year, their economic and strategic partnership stands at a critical juncture, poised for deeper engagement and recalibration. The remarkable growth in bilateral trade and investment flows over the years has not only fostered economic interdependence but also strengthened the strategic underpinnings of this partnership. Yet, the widening trade deficit and the challenges of an evolving global economic landscape call for reimagining the economic relationship. India, with its focus on enhancing export competitiveness in technology-driven sectors and attracting strategic investments, must look to balance this trade equation with Singapore. At the same time, Singapore’s role as a gateway to Southeast Asia and its continued investments in India’s digital and technological future suggest that both nations stand to gain immensely from a more diversified and synergistic economic engagement. As they chart a course for the future, India and Singapore are well-positioned to deepen their partnership, not just as bilateral allies but as co-architects of the region’s economic growth and stability.