India & Singapore’s Economic Tie

Why in the News?

Singapore’s Prime Minister, Lawrence Wong, has begun a three-day trip to India with the objective of strengthening economic ties between the two nations. This is Wong’s first visit to India as Prime Minister, where he is accompanied by senior cabinet ministers. The visit aims to expand two-way economic engagement and sign agreements in sectors like shipping, civil aviation, space, solar energy, data storage, and green hydrogen.

Key Points: India & Singapore’s  Economic Tie

• PM Wong’s visit focuses on boosting bilateral trade and investment.
• Singapore is India’s top foreign investor, contributing about 24% of India’s FDI equity inflows since 2000.
• Agreements will be signed in sectors such as civil aviation, shipping, space, solar energy, data storage, and green hydrogen.
• Both PMs will virtually inaugurate a container terminal in Maharashtra, where Singapore has invested over USD 1 billion (₹8,800 crore).
• Wong will also meet President Droupadi Murmu, External Affairs Minister S. Jaishankar, and other key leaders.
• The visit includes paying tribute to Mahatma Gandhi at Rajghat.

India-Singapore Relations – Historical Context:

• Diplomatic relations were established in 1965, the year Singapore gained independence.
• Ties have been built on shared cultural links, economic cooperation, and strategic interests.
• The 2005 Comprehensive Economic Cooperation Agreement (CECA) was a milestone in deepening trade relations.
• Singapore has been a strong partner in Skill India, Smart Cities Mission, fintech, defence cooperation, and Act East Policy.
• The country is a key investor in India, particularly in infrastructure, technology, and finance sectors.
• Both nations collaborate closely in forums like ASEAN, East Asia Summit, and Indian Ocean Rim Association (IORA).

India–Singapore Trade Relations:

Major Trading Partner:

• Within ASEAN, Singapore is India’s top partner in terms of both trade and investment.
• It acts as a gateway for Indian companies to access Southeast Asian markets and vice versa.

FDI Flows:

• Singapore has been India’s top source of FDI for many years.
• Since 2000, Singapore has contributed about 24% of India’s total FDI inflows, with investments in real estate, logistics, fintech, renewable energy, startups, and infrastructure.
• Key Singaporean investors include Temasek Holdings, GIC, Ascendas-Singbridge, and Sembcorp.

Comprehensive Economic Cooperation Agreement (CECA) – 2005:

• A landmark pact that provided a framework for free trade, investment protection, and services liberalization.
• It has been revised multiple times to include new sectors such as fintech, digital services, and intellectual property rights.
• CECA also facilitates the movement of professionals and skilled labor between the two countries.

Bilateral Trade Volume:

• During 2023–24, the trade volume between India and Singapore stood at an estimated USD 35–40 billion.
• Singapore is a hub for re-export of Indian goods, especially petroleum products, pharmaceuticals, gems & jewelry, and electronics.

Key Sectors of Trade Cooperation:

• Energy: Renewable energy, especially green hydrogen, solar power, and battery storage projects.
• Technology: Digital payments, fintech, cybersecurity, and data storage.
• Infrastructure: Smart cities, port development, and logistics.
• Defence: Maritime security cooperation, especially in the Strait of Malacca.
• Shipping and Civil Aviation: Agreements to boost port connectivity and air travel.

Digital Economy & FinTech Cooperation:

• India and Singapore are leaders in digital payments and fintech innovation.
• In 2023, the linking of India’s UPI with Singapore’s PayNow was a landmark step in cross-border digital transactions.
• Cooperation is expanding in blockchain technology, cybersecurity, and e-governance platforms.

Investment in India’s Growth Initiatives:

• Singapore has invested heavily in Make in India, Startup India, and Digital India initiatives.
• Key sectors of investment include IT parks, industrial corridors, logistics hubs, and renewable energy projects.

Trade in Services:

• Services such as finance, education, IT, and healthcare form a significant part of the bilateral trade.
• Singapore-based companies often partner with Indian firms for outsourcing and skill development projects.

Recent Developments:

• The visit by PM Lawrence Wong will focus on expanding CECA, especially to include green energy, space collaboration, and emerging technologies.
• Singapore will continue to play a role in India’s Act East Policy, enhancing connectivity with other ASEAN nations.