Does India's Act East Policy Affect the Reconfiguration of Import Sourcing from Southeast and East Asia? Evidence from HS84 and HS85 Imports
This study utilizes a 35-year panel dataset and a two-way fixed effects model to empirically analyze how India's Act East Policy has influenced the sourcing patterns and concentration of its machinery and electrical equipment imports from strategic Asian partners compared to other regional and non-Asian sources.
Original paper licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). This is an AI-generated explanation of the paper below. It is not written or endorsed by the authors. For technical accuracy, refer to the original paper. Read full disclaimer
Trade is often imagined as a simple exchange of goods, but for a nation, it is also a map of relationships. When a country buys machinery or electrical equipment, it is not just acquiring tools; it is choosing partners. These choices reveal who a nation trusts, who it relies on for its industrial future, and how its economic alliances are shifting. For decades, India looked toward its eastern neighbors to build these connections. In the 1990s, the country launched a strategy called the Look East Policy, aiming to strengthen ties with Southeast Asia. In 2014, this evolved into the Act East Policy, a more aggressive push to deepen economic and strategic bonds with the broader Indo-Pacific region, including advanced manufacturing hubs like Japan and South Korea. The natural question for economists and policymakers is whether this shift in diplomatic tone actually changed the physical flow of goods. Did India simply buy more from everyone in the East, or did it fundamentally reorganize its supply chain, favoring a specific group of allies over others?
A recent study by economist Kiran Thokchom at Dhanamanjuri University tackles this question by examining the specific machinery and electrical components that drive modern industry. The researcher focused on two major categories of goods, known in global trade records as HS 84 and HS 85, which cover everything from industrial engines to computer chips and household appliances. By analyzing thirty-five years of data, from 1991 to 2025, the study tracked India's imports from fifteen major trading partners. This group included both Asian nations, such as Japan, South Korea, and Singapore, and non-Asian partners like Germany, the United States, and France. The goal was to see if the 2014 policy shift caused India to lean more heavily on its "strategic" Asian partners while pulling back from others, or if the change was a uniform increase across the board.
To find the answer, the researcher used a statistical method that acts like a high-resolution filter, separating the signal of policy change from the noise of other economic factors. The study controlled for the size of the partner countries' economies and the value of their currencies, ensuring that any observed changes were linked to the policy itself rather than general growth or exchange rate fluctuations. The analysis revealed a clear and distinct pattern. After 2014, India's imports of these critical manufacturing goods from strategic Asian partners increased significantly. In fact, the data suggests that the policy was associated with a roughly fifty-two percent increase in sourcing from these specific allies, once other factors were accounted for. Conversely, the relationship with non-strategic partners showed a relative decline. This indicates that the Act East Policy did not just expand trade in a general sense; it actively reshaped the network, steering India's industrial needs toward a select group of eastern partners.
The study also looked at the overall balance of these relationships to see if India was spreading its bets more widely or concentrating them. To measure this, the researcher calculated a concentration score, a number that rises when a country relies on fewer suppliers and falls when it spreads its purchases across many. For most of the study period, India's sourcing was moderately concentrated, meaning it relied on a subset of partners but not just one. However, the data shows a recent shift. While the concentration score had dipped to a low point around 2022, it began to climb again, rising from 0.1186 in 2022 to 0.1434 by 2025. This upward trend suggests that in the most recent years, India's import network has become slightly more focused on a smaller group of suppliers, rather than diversifying further.
The findings paint a picture of a deliberate strategic realignment rather than a simple expansion of trade. The evidence suggests that the Act East Policy has successfully reconfigured India's manufacturing supply chain, strengthening ties with specific Asian partners while the overall network has become somewhat more concentrated in the last few years. This does not mean India has stopped trading with the rest of the world, but it does indicate that the most critical machinery and electrical components are increasingly coming from a specific, strategically chosen circle of allies. The study concludes that the true impact of the policy lies not in the total volume of goods moving across borders, but in the changing direction of those flows, signaling a deeper, more targeted integration with the economies of the East.
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