- Not being part of the Regional Comprehensive Economic Partnership because of fears of competition would, in the long term, harm the country’s interests
Not being part of the world's biggest free-trade agreement " the Regional Comprehensive Economic Partnership (RCEP) " would be a mistake for India. Prime Minister Narendra Modi pulled out of the deal in November, contending it would not benefit his country. But his foreign minister's suggestion that New Delhi could reassess its decision has breathed new life into hopes that the pact could be signed this year. Negotiations have to be returned to; not to sign up would harm Indian growth and development and rob the grouping of an important partner.
Foreign Minister Subrahmanyam Jaishankar recently told a forum in New Delhi that India had not "closed the door" on RCEP and "the ball is in the court of the countries concerned and whether they make it worth our while". The countries " the 10 members of the Association of Southeast Asian Nations, China, Japan, South Korea, Australia and New Zealand " together already make a formidable economic force. Four are among the world's 15 biggest economies and India, in fifth place, behind China and Japan, in second and third, would add overwhelming weight. Concern about competition was why New Delhi walked away after seven years of talks.
India's 'door still open' to RCEP free-trade deal: foreign minister
China is India's biggest concern. Modi worries that joining the RCEP and reducing or scrapping tariffs would flood his country with cheap Chinese goods, negatively impacting the manufacturing sector and imperilling jobs and economic growth. Beijing's subsidies to state-run firms are seen as giving an unfair advantage. Indian dairy farmers worry about giving free-trade privileges to competitors in Australia and New Zealand.
Modi's rhetoric about economic reforms belie an increasingly protectionist stance. Such thinking is short-sighted. Only after economic liberalisation in 1991 did India begin posting impressive annual growth rates that have decreased poverty levels from 50 per cent of the population to 20 per cent. But growth levels of as high as 11.4 per cent recorded in the first quarter of 2010 have been steadily declining. India's GDP growth rate slumped to 4.5 per cent in the third quarter of 2019, the lowest in six years.
In such circumstances, turning to the global economic growth engine of East Asia makes sense. As the region's countries have shown, integration into global value chains through trade is a guaranteed path to prosperity. Joining the RCEP would lower barriers not just to finished products, but the inputs needed by manufacturers, while being of particular benefit to the services industry. Importantly, it would also force India to compete. Protectionism has to be set aside; joining the RCEP is in India's interest.
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