India-Thailand Bilateral Trade and Investment

Thailand, the second-largest economy in ASEAN, has successfully transitioned from an agriculture-based economy to a diverse industrial and service-oriented one. India and Thailand share deep historical economic and cultural ties, which have been further strengthened by India’s “Act East” and Thailand’s “Act West” policies. These strategic initiatives have enhanced bilateral relations, positioning Thailand as a key regional partner in India’s engagement with ASEAN, BIMSTEC, Mekong Ganga Cooperation, and the Asia Cooperation Dialogue. In 2023, Thailand ranked India’s 4th largest trading partner within ASEAN.

India-Thailand bilateral trade

In June 2024, India exported US$369 million worth of goods to Thailand and imported US$921 million, resulting in a trade deficit of US$552 million.

Trade between the two countries increased from US$12.14 billion in 2019 to US$16.04 billion in 2023. In 2023, Thailand’s exports to India amounted to US$10.11 billion, while India’s exports to Thailand were US$5.92 billion.

India’s major exports to Thailand include jewelry (silver bars and gold), machinery and parts, metal waste, chemicals, vegetables, pharmaceutical products, aquatic animals, vehicle parts, iron and steel products, electrical machinery, and household appliances.

Thailand’s major exports to India include animal and vegetable fats, chemical products, polymers, precious stones, machinery, motor cars, copper, aluminum, data processing machines, air conditioning equipment, and rubber products.

Source: Trading Economics

Investments and commercial presence

Indian Investment in Thailand

Over the past few years, Indian investments in Thailand have shown varied trends, reflecting the growing economic relationship between the two countries. From an investment of US$23.38 million in 2019, Indian investments peaked at US$124.73 million in 2021 before decreasing to US$29.44 million in 2023, as per Thailand’s Board of Investment (BOI).

Thai Investment in India

Thailand’s investment in India has been increasing in recent years, with significant growth in infrastructure, real estate, agro-processing, electronics, automotive, food processing, hospitality, and renewable energy. Notably, in 2021, Global Renewable Synergy Co., Ltd made the largest investment of US$453.29 million in India’s renewable energy sector. Between 2019 and 2023, Thailand’s FDI inflows into India saw significant variation, with 2021 witnessing the highest inflow at US$533.86 million.

Port Collaboration

India and Thailand are also focusing on enhancing direct port-to-port connectivity. In 2019, three Memorandums of Understanding (MoUs) were signed between Ranong Port (Thailand) and Indian ports in Visakhapatnam, Chennai, and Kolkata, further promoting trade and economic collaboration.

This growing partnership in investment, connectivity, and trade highlights the robust economic ties between India and Thailand, paving the way for deeper cooperation across multiple sectors.

DTAA

The Double Tax Avoidance Agreement (DTAA) between India and Thailand, was signed on 29 July 2015 and effective from 13 October 2015. It applies to various forms of income, including business profits, dividends, interest, royalties, capital gains, and employment income.

Key Provisions

• Withholding Tax Rates: The DTAA has substantially reduced withholding tax rates on dividends, interest, and royalties.
  • Dividends: 10%
  • Interest: 10%
  • Royalties: 10%

Taxes Covered:

• • India: Income tax and, formerly, wealth tax.
  • Thailand: Income tax and petroleum income tax.

Capital Gains:

• • Taxation depends on the type of asset (e.g., immovable property taxed in the country of location, gains from shares taxed based on the country of residence).

Employment Income:

• • Income is generally taxable in the country where employment is exercised, with exceptions under the ‘183-day rule’ for short-term assignments.

Benefits

• Reduced Tax Burden: The DTAA has significantly reduced the tax burden on businesses and individuals engaged in cross-border activities.
• Enhanced Economic Cooperation: The agreement aims to facilitate mutual economic cooperation and stimulate the flow of investment between India and Thailand.
• Prevention of Double Taxation: The DTAA ensures that taxpayers are not subject to double taxation on the same income.

Business Note/Recommendations

Key Areas for Focus

• Deepen Economic Cooperation: India and Thailand should explore opportunities to deepen economic cooperation beyond bilateral trade. This could include:
  • Comprehensive Economic Cooperation Agreement (CECA): Negotiating a CECA to reduce tariffs, liberalize trade in goods and services, and promote investment.
  • Encouraging joint ventures between Indian and Thai companies to leverage their respective strengths and market knowledge, and facilitating the transfer of technology and expertise between the two countries to enhance competitiveness.
• Expand Investment: India and Thailand should create a more favorable environment for investment by:
  • Improving Infrastructure: Investing in infrastructure projects to enhance connectivity and reduce logistics costs.  
  • Reducing Regulatory Barriers: Streamlining regulatory processes and reducing bureaucratic hurdles for investors.
  • Promoting Industrial Parks: Developing joint industrial parks to attract investment and create jobs.
• Enhance Connectivity: Expanding connectivity between India and Thailand is crucial for boosting trade and investment. This could involve:  
  • Improving Air Connectivity: Increasing the frequency of direct flights between major cities in India and Thailand.
  • Expanding Maritime Connectivity: Enhancing port infrastructure and promoting direct port-to-port connectivity.  
  • Exploring Rail Connectivity: Exploring the feasibility of rail connectivity between the two countries.
• Harness the Potential of the DTAA: Fully utilizing the provisions of the Double Taxation Avoidance Agreement (DTAA) to minimize tax burdens for businesses operating across borders.

Conclusion

The India-Thailand bilateral relationship offers significant potential for economic growth and cooperation. By focusing on these key areas, the two countries can further strengthen their economic ties, enhance trade and investment, and create new opportunities for businesses and individuals.

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