A new report suggests that the Association of Southeast Asian Nations' (ASEAN) Digital Economy Framework Agreement (DEFA) provides India with a blueprint for deeper digital engagement with Southeast Asia. The report, from The Jakarta Post, argues that the agreement's design, which relies on "managed interoperability" to achieve common commercial outcomes without requiring identical domestic laws, could serve as a model for India-ASEAN cooperation. However, it cautions that integrating the DEFA into the existing ASEAN-India Trade in Goods Agreement (AITIGA) would be counterproductive, and that the final text remains unpublished, leaving the true scope of its commitments unclear.
A Blueprint for Digital Cooperation
Digitally delivered services now account for approximately half of ASEAN's trade in services, according to the report, highlighting the growing importance of the digital economy in the region. India, with its strong IT services sector and large-scale digital public infrastructure, is positioned as a complementary partner to ASEAN's strength in electronics and semiconductor supply chains. The trade relationship reflects this complementarity, with ASEAN holding a surplus in ICT goods while India excels in ICT-related services like computer and business services. Currently, ASEAN's digital trade connections with India are concentrated in Singapore, Malaysia, and Vietnam, suggesting room for broader engagement across the region.
The DEFA, concluded in Manila in May, covers nine areas: digital trade, cross-border e-commerce, payments and e-invoicing, digital identity, cross-border data flows and data protection, online safety, cybersecurity, and emerging technologies. It builds on earlier ASEAN initiatives, such as the 2019 ASEAN Agreement on Electronic Commerce, which came into force in 2021. That earlier agreement committed members to facilitate electronic transactions while recognising differing domestic laws. Since then, ASEAN has advanced work on interoperable payments, electronic documents, digital identities, and voluntary guidance on artificial intelligence. The DEFA extends this architecture rather than creating it from scratch, the report notes.
A Note of Caution on AITIGA
Despite the DEFA's potential, the report warns that incorporating it into the AITIGA would be counterproductive. The AITIGA remains a trade-in-goods agreement, and its ongoing review has focused on traditional issues like market access, rules of origin, and customs procedures. Broadening the negotiations to include the DEFA's more complex digital trade issues could derail the process, the report argues. ASEAN and India have targeted 2026 for concluding the AITIGA review, with negotiations shaped by India's concerns over its goods deficit and ASEAN's push for a more trade-facilitative agreement.
However, the report also cautions against reducing the digital economy to an aspiration. While the negotiated text of the DEFA is not yet public, the depth, exceptions, and enforceability of its commitments will only become clear after signature. The report's analysis underscores the importance of a pragmatic approach to digital trade, one that focuses on tangible outcomes rather than vague ambitions.
Challenges and Divergent Interests
The report's analysis reveals that despite the potential for closer digital trade ties, several regulatory and technical frictions remain. These are evident in India's data governance framework, which includes the Digital Personal Data Protection (DPDP) Act 2023, which permits overseas transfers of personal data unless restricted by the government, and the Reserve Bank of India's 2018 circular requiring payment-system providers to store data locally. Similarly, India's 2022 CERT-In Directions mandate reporting of specified cyber incidents within six hours and retention of system logs for 180 days. Other regulations, such as India's IT Rules 2021 requiring significant social-media intermediaries to appoint India-resident officers, and Malaysia's Cyber Security Act 2024, which introduces licensing for certain cybersecurity services, add to the complex regulatory landscape.
The report also notes that AI-enabled medical-device software may require approval under India's Medical Devices Rules 2017 and Malaysia's Medical Device Act 2012, highlighting the sector-specific hurdles that can impede digital trade. These regulations, while each serving a purpose, can become barriers without active efforts toward interoperability.
Existing Digital Ties and Future Prospects
India and ASEAN already have a foundation of digital cooperation. The India-Singapore Comprehensive Economic Cooperation Agreement (CECA) includes a chapter on electronic commerce, and the UPI-PayNow linkage, launched in 2023, facilitates cross-border payments. Similarly, the UPI-DuitNow QR linkage with Malaysia has completed its first phase. The Open Network for Digital Commerce (ONDC) and Singapore's Proxtera are working to connect small and medium-sized enterprises, and TradeTrust has demonstrated the potential of interoperable electronic bills of lading for trade finance. The inaugural India-Singapore Cyber Policy Dialogue was held in October 2024, and the Malaysia-India Digital Council has been operationalised with a focus on digital public infrastructure, cybersecurity, digital talent, and AI.
These initiatives reflect strong existing ties, underscored by Singapore's position as India's largest source of foreign direct investment (FDI) in 2024-25, with flows of approximately US$14.94 billion. Cumulative Singaporean FDI into India reached US$179.48 billion between April 2000 and June 2025, about 24% of total inflows, and around 9,000 Indian companies are registered in Singapore.
Looking ahead, India accounted for roughly 10.5% of global computer-services exports and 8.3% of other-business-services exports in 2025. Computer and other business services represented 38.2% and 55.5%, respectively, of India's digitally delivered services exports. These figures, the report suggests, indicate India's growing footprint in the global digital economy—and the potential for the DEFA model to foster even deeper and more productive ties with its Southeast Asian neighbours.