The India-ASEAN Free Trade Agreement (AIFTA) came into effect on 1 January 2010 with regard to Malaysia, Singapore and Thailand. For the remaining ASEAN members it will come into force after they have completed their internal requirements. With this background, the present study analyses the impact of this free trade agreement (FTA) on India and the ASEAN members. Using the Global Trade Analysis Project (GTAP) database, several simulations were undertaken, involving different scenarios, of India’s trade liberalization with the ASEAN region. The results of the simulations were used to assess the impact of this liberalization, both on the external sector and on domestic macroeconomic variables in India and ASEAN. The welfare implications of the FTA for the countries were also studied and the impact on the trade of other countries, including selected South Asian countries, was investigated.