India has granted market economy status to communist-ruled Vietnam, an important step to ramp up its economic engagement with the Association of South East Asian Nations (Asean).
Industry and trade officials here said yesterday that the move gave more substance to a free trade agreement between the two sides.
India granted the market economy status during bilateral talks between Prime Minister Manmohan Singh and his Vietnamese counterpart Nguyen Tan Dung on the sidelines of Asean summit in the sea resort of Hua Hin in southern Thailand on Sunday.
The conferring of market economy status by India to Vietnam came before the World Trade Organisation (WTO) deadline after Hanoi insisted on it before signing the India-Asean Free Trade Agreement.
In a market economy, prices of goods and services are determined by demand and supply.
With the new move, India will accept prices prevailing in the Southeast Asian nation as the basis for determining investigations into complaints of anti-dumping against imported goods, officials say.
India is yet to give such status to China, another communists-ruled country.
Earlier, India used to investigate dumping cases from Vietnam on the basis of prices prevailing in a third country.
Anti-dumping probe arises when a recipient country suspects that the exporting nation is supplying goods at abnormally low prices that will affect the domestic industry of the importing country and the prices are controlled by the government of the exporting country.
In fact, India had recently imposed anti-dumping duty on textile imports from Vietnam.
Although India-Asean FTA would have gone into force even without Vietnam signing the document, India did not want any of the ten-member countries of Asean to remain out of the deal, Indian officials say.
They pointed out that the FTA between South Korea and Asean did not include Thailand for a long time.
All Asean member-countries, Australia and New Zealand have already recognised Vietnam as a market economy country, which registered one of the highest economic growth in the region.
Trade volume between India and Asean stood at $48 billion in 2008 and is expected to touch the $50-billion mark next year.