According to the think tank Global Trade Research Initiative (GTRI), if India were to join the Regional Comprehensive Economic Partnership (RCEP) accord, it would not be the first choice for investors looking to pursue a China+1 strategy.
It also cautioned that the move would result in flight of domestic capital in the manufacturing sector out of India and that introducing tariff-free Chinese goods into India could “overwhelm” MSMEs, as their smaller-scale operations are unlikely to withstand competition from China’s mass manufacturing.
The CEO of Niti Aayog, BVR Subrahmanyam, stated earlier this month that India ought to be a party to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or RCEP. Despite starting talks in 2013, India’s reservations about the large trade deficit with China were not addressed, hence it left the RCEP in 2019.
GTRI stated that the benefits of joining RCEP are “minimal and incremental,” particularly in light of China’s opaque trade practices and India’s growing trade deficits with member nations. “The challenges RCEP poses for India’s domestic industries, particularly MSMEs and agriculture, suggest a cautious approach,” the GTRI added.
Furthermore, according to the research, India currently has a number of working free trade agreements (FTAs) with 13 of the 15 RCEP members, with the exception of China and New Zealand. Joining the bloc would probably not open up many new export opportunities for India, as its shipments to Beijing have not increased in the previous five years. GTRI refuted the claim that India’s integration into regional value chains (GVCs) will be aided by RCEP membership, stating that India has not emerged as a major GVC player despite more than ten years of zero-tariff trade of the majority of industrial commodities with South Korea, Japan, and ASEAN. According to the analysis, India’s long-term economic goals could be best served by concentrating on increasing competitiveness rather than signing broad trade deals.
