R Krishna Das
With China and 14 other Asia-Pacific nations signing the Regional Comprehensive Economic Partnership (RCEP) on November 15, India’s withdrawal from the world’s largest free trade agreement (FTA) is a right move; hinting at an economic divide in the region.
The withdrawal of India from the RCEP would be a severe blow to the ability of the remaining countries to sell the RCEP as delivering any of its projected gains. For India, the research vindicates the government’s conclusion that the RCEP would impose significant costs on India’s economy and in particular on the resilience of crucial areas of its economy and livelihoods.
Stating that the China-backed trade agreement failed to address its concerns, India opted out of it.
Another major reason for India pulling out of the RCEP was that the deal would have brought down the import duties on goods by 80-90 percent. Industry experts feared that this may result in a flood of imports which have a massive trade deficit.
A study was conducted to identify and rationalize some of the issues and concerns that India had with the signing of the RCEP. By analysing the existing trade balance, import surge trends, dumping, and agricultural sensitivities, among other factors, the study provides the justification for India’s decision to remain outside of this mega FTA.
Results show that India’s GDP would be adversely affected in case India joins this agreement, and its overall trade deficit might deteriorate after joining the RCEP. In terms of the bilateral trade balance, India’s trade deficit with ASEAN and China would grow steeply if it joins the agreement.
The study also finds that an RCEP without India might lose its shine as the GDP of most of the other members of the RCEP would be negatively impacted by India’s decision to stay out. ASEAN member countries, in particular, would be adversely impacted by the agreement in terms of their trade balance whether or not India joins the RCEP.
If India had signed the agreement, its vulnerable sections’ consumers would have been impacted by paying more for goods.
