India and Taiwan have started negotiations to set up a free-trade agreement and set up a semiconductor manufacturing hub in an Indian city, signalling their resolve to expand the two-way economic engagement.
People familiar with the development said that if the semiconductor manufacturing plant is successful, it will only be the second such facility by Taiwan in a foreign country, after its production hub in the United States.
The Indian government has already proposed a number of sites for the facility, and one of Taiwan's leading semiconductor producers, including the Taiwan Semiconductor Manufacturing Company TSMC and the United Microelectronics Corporation UMC, may implement the mega project, they said.
Taiwan is a major player in the production of chips in the world. TSMC produces around 50 percent of all semiconductors in the world, according to industry estimates.
One of the people cited above said there was a strategic significance of setting up the FTA and setting up the semiconductor hub.
Taiwan considers itself a sovereign state. China claims Taiwan is part of its territory.
The move to set up the facility comes amid increasing demands for chips in India by automakers and technology companies, when there is a global shortage of chips.
The semiconductor plant in the US was set up in the light of the close strategic ties between the two sides. One of the people cited above said it will be the same in India's case as well.
The US has remained steadfast in its outreach to Taiwan in the face of increasing Chinese hostilities and reassuring Taipei of its continued support.
The government on Wednesday unveiled a plan to give incentives worth Rs 76,000 crore to promote the setting up of semiconductor design, manufacturing and display fabrication fab units with a larger goal of making India a global electronics production hub.
In tandem with their keenness to expand economic engagement, India and Taiwan have already held two rounds of talks for the establishment of an FTA and a bilateral investment agreement to boost trade ties, the people said.
India is promoting its ties with Taiwan in the areas of trade, investment, tourism, culture, education and people-to-people exchanges.
The volume of bilateral trade has risen nearly six-fold from USD 1.19 billion in 2001 to almost USD 7.05 billion in 2018 and India is Taiwan's 14th largest export destination and 18th largest source of imports, according to official data.
Around 106 Taiwanese companies are currently operating in India, with the total investment amounting to USD 1.5 billion in the fields of information and communication technology, medical devices, machinery, steel, electronics, construction, engineering and financial services.
The two sides have set up teams for further expansion of ties in education as well as skill development training.
An estimated 2,800 Indian students are studying in Taiwan.
India does not have formal diplomatic ties with Taiwan, but both sides have trade and people-to-people ties.
In 1995, New Delhi set up the India-Taipei Association ITA in Taipei to promote business, tourism and cultural exchanges.
The ITA has been authorised to provide all consular and passport services.
In the same year, Taiwan also established the Taipei Economic and Cultural Center in Delhi.