NEW DELHI: India and Vietnam are set to begin talks on a potential trade agreement in an effort to boost bilateral trade and investment.

A person familiar with the matter said a joint Indo-Vietnamese working group will be formed in the coming months to examine the feasibility of a trade pact. The assessment of this study will then be taken up by the governments of both countries, the person said requesting anonymity.

This comes in the backdrop of robust growth in bilateral trade volumes between India and Vietnam. According to the Indian embassy in Hanoi, bilateral trade shot up from just $200 million in 2020 to $14.14 billion in 2021-22. The person said India and Vietnam have already met the $15 billion target set for bilateral trade.

The prospects for a trade pact will also be discussed at a joint meeting between both countries expected to be held by March-end, the person said, adding that India’s active interest in free trade agreements (FTAs) with select partners like the UAE, Australia and the UK has also sparked Vietnam’s interest in discussing the possibility of a trade deal.

Vietnam is a key partner in India’s Act East policy and the trade talks come in the backdrop of an increasingly tighter strategic embrace between New Delhi and Hanoi to check Chinese power projection in the region.

New Delhi has also been a key defence partner to Hanoi in recent years and provided a $500 million defence line of credit to help the Southeast Asian nation bolster its military.

India’s top exports to Vietnam include metals, machinery, electronics and electronic equipment, and agricultural products. India’s exports to Vietnam surged 34% in FY22 to $6.7 billion. In comparison, Vietnam exported goods worth $7.44 billion to India, exporting products such as electronic equipment, chemicals, machinery and animal feed. Queries sent to the Vietnamese embassy and India’s commerce ministry went unanswered.

Despite the rapid growth in trade between India and Vietnam, investment levels have remained low. With about $1.9 billion invested in Vietnam, India is only the 25th largest investor in the country. Vietnam’s presence in India is even more limited, with an investment of just $28.55 million spread across six projects.

The person cited above said boosting investments is likely to be a focus of the trade talks. Commerce minister Piyush Goyal had said that the ministry could finalize at least two free trade agreements (FTAs) in 2023.

India is engaged in trade talks for an FTA with a number of key economies, including the UK, Canada, the EU and the Gulf Co-operation Council (GCC).

Moreover, it has launched negotiations for a comprehensive trade talk with Australia after the mini trade deal came into effect last year.