It was a tough call but in the end, pragmatism prevailed over adventurism as India decided not to join RCEP (Regional Comprehensive Economic Partnership), a 16-member trade group that aims to cover about a third of the world economy. India is justifiably worried that the RCEP trade deal doesn’t provide adequate protection against possible surges of imported goods. There are fears of cheap Chinese goods, particularly electronic and engineering, flooding the market with disastrous implications for the domestic manufacturing sector. Moreover, India has over $105 billion trade deficit with the RCEP countries, which include China, Australia, New Zealand, South Korea and Japan, apart from 10 ASEAN countries. Keeping the domestic interests at the forefront, the Indian negotiators have been maintaining a consistent stand during the last six years of negotiations that the country’s concerns must be addressed fully. China is the biggest trade partner among the group and, understandably, New Delhi’s major concerns during the negotiations were with regard to China. India’s decision, announced by Prime Minister Narendra Modi at the Bangkok meeting, must be seen as a practical step in the given circumstances to safeguard the interests of farmers and domestic industries. Keeping in view the large trade deficit with a majority of the RCEP countries, India has been looking for specific protection for its industry and farmers from a surge in imports, especially from China that alone accounts for $54 billion trade deficit. During the negotiations, India didn’t get any credible assurance on market access and non-tariff barriers.
The domestic industry and dairy farmers have been voicing reservations about the trade pact, which is also seen as being detrimental to the government’s ‘Make in India’ initiative. Farmers and industry bodies were readying for a nationwide protest if India had gone ahead with RCEP. It could have been a misadventure to get into the trade pact without the key domestic concerns being addressed, particularly at a time when the country is reeling under worrisome economic slowdown and job losses. India had entered the RCEP negotiations in 2013 during the previous UPA government. Until now, 28 rounds of discussion have been held. However, India’s exit is not the final decision as it will continue to sit through RCEP negotiations, which are now expected to conclude in Vietnam in February 2020. A section of economists had also argued that India’s hesitation to get on board reflects its weakness and lack of confidence even 28 years after opening up its economy and embracing reforms and global competition. While there is no doubt that the long-term interest lies in India being integrated into global value chains, a cautious approach is necessary for now, keeping in view the interests of the domestic industry.