Singapore and India share a unique relationship that has a deep-rooted cultural, economic, and historical connection. Indians are one of the major ethnic groups in Singapore and constitute nearly 9% of the total population. Around 2.5% of the population speaks Tamil, which is one of the four official languages of the island nation besides English, Mandarin, and Malay.
Today, the Singapore-India relationship creates a new chapter of trust, mutual understanding, and cooperation that paves the way for regional economic growth and security, not just for the two countries. Over the years, both sides have signed various agreements to work together across several key areas to expand their trade and business opportunities, in addition to defense and security cooperation.
The island nation remains one of India’s largest trade and investment partners among the Association of Southeast Asian Nations (ASEAN) members. Singapore’s foreign direct investment (FDI) inflows to India were worth more than USD 136 billion over the last 22 years (2000-2022), representing about one-fourth of the total FDI inflows. For the financial year (FY) 2021–22, the India–Singapore bilateral trade constituted 27.3% of the total ASEAN trade activities.
One of the most historic moments in the Singapore-India relations was the signing of the Comprehensive Economic Cooperation Agreement (CECA) in 2005. The CECA was the first bilateral agreement that India ever signed with any country. The agreement highlighted the importance of economic cooperation and trade and investment protection in various fields, including science and technology, education, intellectual property (IP), etc.
India, as the fastest-growing economy in the world, is a major business investment destination for Singapore-based businesses. The presence of a large English-speaking population in both countries and increasing government initiatives to ease people-to-people links play crucial roles in fostering closer business ties between the two countries.
A brief history of the Singapore-India relationship
The origin of the Singapore-India relationship can be traced back as early as the mid-1960s. The two countries first established diplomatic relations fifteen days after Singapore became an independent country on August 9, 1965. However, India and Singapore had different approaches to their foreign policy during the Cold War era. As a result, New Delhi adopted a non-alignment policy, while Singapore joined the North Atlantic Treaty Organization (NATO) for military alliances.
In the 1990s, the Singapore-India relationship was profoundly changed as both countries agreed to expand their economic, cultural, and strategic ties. Emerging as a strong regional player in Southeast Asia, India adopted the “Look East Policy” in 1992 to strengthen its ties with countries in Southeast Asia. Singapore was among the first to support India’s policy and positioned itself as the major sponsor for greater political, economic, and security cooperation in the region.
The Singapore-India business relationship had a major turning point when both countries signed the CECA in 2005. Under the agreement, New Delhi and Singapore agreed to eliminate tariff barriers, double taxation, and complex regulations for better collaboration among the financial institutions and investors between the two countries. As the relationship progressed, both countries expanded their bilateral cooperation beyond economic relations.
Their bilateral cooperation expanded in defense and maritime security, focusing on developing military technology and conducting joint naval exercises. In November 2015, the Indian Prime Minister (PM) Narendra Modi visited Singapore to reaffirm fifty years of bilateral relations between the two countries. Both countries, under the leadership of Modi and his counterpart, Singapore PM Lee Hsien Loong, concluded the second review of the Singapore-India CECA in June 2018. In the third CECA review, both countries discussed better trade facilitation, customs, dispute settlement, IP rights, and e-commerce services.
In 2018, both sides engaged in two-way prime ministerial meetings and visits that shaped a new level of strategic partnership between Singapore and India. Singapore’s PM Lee participated in India’s 2018 Republic Day and also co-chaired the ASEAN–India Commemorative Summit. Meanwhile, Indian PM Modi participated in various forum meetings, such as the East Asia Summit, and delivered a keynote address at the annual Shangri La Dialogue and the Singapore Fintech Festival.
In the post-pandemic period, Modi held several bilateral meetings with Lee on the sidelines of the G20 Summits, held in Rome and Bali. Lee visited New Delhi and attended the G20 Summit in September 2023 to discuss the shared interests and efforts toward building a stronger partnership.
Singapore-India bilateral trade relations
After the conclusion of the CECA, Singapore stood as India’s 9th biggest trading partner in FY 2005–06. The bilateral trade between India and Singapore has witnessed exponential growth over the years. The bilateral trade was worth USD 6.7 billion in FY 2004–05 and reached USD 30.11 billion in FY 2021–2022.
The Singapore-India bilateral trade reached USD 35.59 billion in FY 2022–23, registering a growth of 18% compared to the previous financial year. In the mentioned fiscal years, India’s exports to Singapore had grown to 7.5%, and Singapore to India had a significant growth of 24%.
Singapore is India’s largest source of FDI in the Southeast Asia region and has been the leading contributor based on country-wise foreign inflows in India for the past five years, 2017–2022. The FDI inflows from Singapore to India were worth USD 76.4 billion during these five years, according to the Economic Times. Singapore alone contributed a whopping USD 15.9 billion worth of inflows into India for FY 2021–22, followed by the US at USD 10.5 billion and Mauritius at USD 9.4 billion.
India witnessed a decline of 16% of the total FDI inflows in FY23 compared to FY22 due to the sharp drop in equity flows from traditional investors, like the US, the Netherlands, Mauritius, and the Cayman Islands. On the contrary, India’s inflows from Singapore and the UAE increased significantly. In FY23, the island nation made nearly USD 17.2 billion worth of FDI in India.
Key areas of Singapore-India business relationship
Over the years, the largest share of Singapore’s FDI equity in India has gone to the manufacturing sector. Also, service sectors such as financial and insurance, telecommunication, pharmaceutical and drug research, as well as IT and communication, have gained significant FDI share. Goods imported from Singapore to India are mostly electronic goods, metals, and organic chemicals, while India’s exports include jewelry, gemstones, petroleum, and machinery. Over half of India’s imported goods from Singapore are resold to other countries.
The key areas of the Singapore-India business relationship are clearly defined and outlined in the four key components of the CECA. The four areas are
- A free trade agreement (FTA) for goods
- An arrangement for boosting trade in services, including financial services
- A deal to promote investment flows and provide mutual investment protection
- A new agreement for avoiding double taxation
A large chunk of Singapore’s investment relates to infrastructural development projects, such as upgrading India’s airports and seaports as well as developing IT infrastructure and special economic zones (SEZ). The island nation has an open-door policy for Indian professionals in IT, engineering, medicine, and financial sectors. India’s leading banks such as State Bank of India, ICICI, Bank of India, Indian Overseas Bank, etc. have operations in Singapore.
According to the Indian High Commission in Singapore, more than 9000 Indian companies are registered in the island nation. The top Indian firms, including Reliance Industries, AdGRoup, Tata Group, Mahindra & Mahindra, and IT giants such as Infosys and Wipro have operation bases in Singapore.
Some notable Singapore companies that have bases in India are DBS Bank, Flextronics Technologies, The Hub Engineering, Singtel Global, STT Global Data Centres, L&W Construction, APL Logistics, Olam Agro, Quest Global Engineering Services, and United Overseas Bank. Singapore companies in India are spread across industries with a main focus on banking, logistics, electronics, data centers, telecommunications, agribusiness, engineering services, construction, and manufacturing.
Over the years, both countries have been working closely on their bilateral collaboration related to science and technology, especially aviation, space programs, aerospace engineering, biotechnology, and energy. Talking about mutual investment opportunities, the derivative contract related to India’s Nifty 50 index, known as Gift Nifty or SGX Nifty is listed and traded on the Singapore Stock Exchange.
Considering the impressive economic growth and rising business opportunities in India across sectors, Singapore sees New Delhi as a promising trade partner in the coming years. With the increasing demand and business opportunities in sectors, like e-commerce, ed-tech, biotechnology, and renewable energy, India offers great investment and business opportunities for Singaporean companies.
In February 2023, top leaders of both countries launched a digital payment that linked India’s UPI and Singapore’s PayNow to facilitate faster and cheaper cross-border retail payments and remittances, for both businesses and individuals. The PayNow-UPI linkage was a major development in the Singapore-India business relationship, which would make cross-border payments easy for business communities of both countries.
Singapore’s interest in India’s skill development projects
Among ASEAN members, India and Singapore are extensively recognized due to their strategic location for global trade and the rising size of English-speaking populations. Also, the presence of a large Indian population in Singapore and strong air connectivity between the two countries play crucial roles in bringing closer ties among businesses and working professionals. At present, 8 airlines directly connect Singapore to 15 major cities in India.
The island nation currently has ties with various states and the central government to establish skill development centers across major Indian cities. The projects for skill development in India have rapidly expanded across different sectors.
The active support from various government organizations and business forums further boosts the business relationship and people-to-people connections between the two countries. Some of the major organizations include the Singapore Business Federation, the Confederation of Indian Industry (CII), and the Federation of Indian Chambers of Commerce and Industry (FICC). Moreover, the regular events under the initiatives of the Singapore-India Partnership Foundation and Singapore-India Parliamentary Forum play an important role in fostering a closer relationship.
One of the significant establishments of the partnership was the foundation of the Singapore-India Entrepreneurship Bridge. The main objective of the forum was to help aspiring entrepreneurs, startups, and investors of both sides connect and share resources for greater business interactions and engagements.
In the inaugural meeting of the Singapore-India Ministerial Roundtable at New Delhi, in September 2022, Indian External Affairs Minister, S Jaishankar reaffirmed the common belief and said, “The exciting start-up environments in India and Singapore are also actively engaging with each other. There is a great potential for cooperation…… such as increasing resilience of supply chains, logistics, skill development, infrastructure, waste and water management, and urban planning.”
Availability of Indian talent for Singapore companies
Singapore, being a multicultural country, offers shelter for various ethnic groups and provides several business platforms for foreign companies. The country has several government grants and policies that facilitate easy entry and operation, contributing to its thriving ecosystem. The major sources of Singapore’s economy are manufacturing and machinery, tourism, financial services, and sea transportation. As an aftermath of the COVID-19 pandemic, the island country was facing a workforce shortage across major industries, such as banking & finance, IT & technology, construction & manufacturing, healthcare, and education.
Although the situation has gradually improved to some extent, Singapore is still facing difficulty in filling up the talent gaps across industries. For instance, many reports revealed that the country’s demand for tech talent has risen by 40% due to the rising talent gaps in fintech and banking companies.
Over the last two years, many Singapore-based businesses moved their operation base to India. This rising opportunity for India expansion by Singapore companies was due to one major advantage— India as a source of talent and productivity at a cheaper cost. Other major reasons for bringing Singapore companies to India are as follows:
- A large presence of the Indian diaspora in Singapore and their gaining influence in the business relations of both countries
- Rising India as a hotspot destination for outsourcing services
- Availability of a large pool of Indian talent and working professionals
- The wide popularity of remote hiring in India through services such as the employer of record (EOR) and freelancing
India and Singapore have forged a robust trade and business relationship over the years. Both countries see enormous business opportunities working together to expand their partnership to a new height. The regular visits and meetings of the top leaders and increasing business interactions through various forums are further boosting the Singapore-India business relationship.
The bilateral business relationship and robust trade cooperation between New Delhi and Singapore share a vision for the economic prosperity of Southeast Asian countries at large. The investment inflows from Singapore to India remain intact and have a high prospect for further investment in the coming years. For instance, the Singapore-government-owned giant global investment company, Temasek Holdings is reported to invest another USD 9-10 billion in India in the three years. New Delhi stands out as a promising destination for Singapore companies.