-
By Rajat Verma- Managing Director and Head of Institutional Banking at DBS Bank India.

India is poised to play a pivotal role in the post-pandemic world order. As the world’s fastest growing large economy, India’s strong fundamentals have positioned it to move from fifth place to third in terms of economic size by 2030. Therefore, it is no surprise that it has built strong commercial relationships with countries across the world and has become a magnet for inbound investments. The US and Europe have historically been India’s largest investors, and while this trend is likely to continue unabated, there has been a notable eastward shift over the past decade. As domestic businesses expand, they are increasingly seeking ways to tap Asian markets and forge links with Asian supply chains. Enter Singapore, the gateway to Asia—a global trading hub with a business-friendly environment and competitive tax regime. India has historic commercial, cultural and people-to-people links with Singapore stretching back millennia. Both parties have continued to build on this foundation, evidenced by the Comprehensive Economic Cooperation Agreement (CECA) that was signed in 2005. After this agreement, bilateral trade more than quadrupled to reach $35.6 billion in 2022-23, underlining the corridor’s efficacy.

Ever since 100% FDI was permitted in India for most types of manufacturing, multiple large Singaporean conglomerates and manufacturing players as well as state institutions have been ramping up—or planning to ramp up—investments in India. Meanwhile, Indian state governments have been collaborating with Singapore for initiatives like smart cities and urban rejuvenation, as well as skills development. Trade has seen a similar trajectory, with the Association of Southeast Asian Nations (ASEAN) being named a central pillar of India’s Act East Policy and ASEAN-India trade accelerating over the past few years to reach $131 billion in 2023. Against this backdrop, there is a compelling case to be made for India doubling down on ties with the ASEAN bloc, and within this group, with Singapore.

The city state’s robust financial infrastructure, central location and technological prowess make Singapore an important hub for Indian companies expanding in Asia. With the movement to diversify global value chains, Asian banks could help Indian companies tap commercial opportunities across the continent, with Singapore as a trading and treasury nexus. In substantiation, there were approximately 6,000 Indian companies registered in Singapore in 2014, a figure that has grown to over 9,000 in 2023, and these cover a range of sectors like tourism, telecommunications, financial services, and e-commerce.

Increased connectivity has spurred advancements in financial technology, exemplified by the launch of the landmark Unified Payments Interface (UPI)-PayNow system linkage in early 2023. In fact, Singapore was the first country with which India announced a cross-border person-to-person online payment facility. Spearheaded by central banks of the respective countries, this innovation is the world’s first real-time payment systems linkage to use cloud-based infrastructure that can scale with increasing remittance volumes and has already reached close to 3,000 transactions a month. The introduction of the TradeTrust Framework last year marked another milestone, as it enables interoperable electronic Bills of Lading (eBLs) for trade finance transactions between Singapore and Indian entities, harnessing blockchain technology to fuel cross-border commerce through digitization. It is estimated that switching to electronic Bills of Lading could bolster supply chain resiliency, saving $6.5 billion in direct costs and further facilitating between $30 billion and $40 billion in new global trade volume (McKinsey, 2022).

India is expected to drive a fifth of global growth by 2031), underscored by several evolving trends such as digital adoption, offshoring capabilities, and the clean-energy transition underway.

In line with the country’s sustainability commitment of generating 500GW of renewable energy capacity by 2030, India’s current mix of renewables is extremely encouraging, as solar and wind sources made up 92% of the country’s 2022 growth in power-generation capacity. Singapore is open to making the best use of India’s burgeoning abilities in renewables, both as a source and as a conduit of much needed investment.

India has demonstrated its soft power, both economically and politically, and its ascendancy is a chance for the country to own an enhanced role on the world stage, advance issues that are important to the Global South and lead the way to a net-zero economy. Collaboration between governments, businesses and financial institutions in the India-Singapore corridor is the key to mutual growth. Underlining this notion was India’s valued invitation to Singapore to participate as a guest country in the G20 meetings, conducted as part of its 2023 Presidency.

The India-Singapore corridor represents more than just economic collaboration; it is a harbinger of a paradigm shift in global dynamics. As the Asia-Pacific region emerges, with India at the helm of global growth, both countries are not merely players, but crucial architects shaping the future of global trade and investment.

As featured on LiveMint

To learn more about our bespoke solutions for corporates, click here