India & RCEP
By Shivaji Sarkar
Keep China out is the new trade policy of India. Its prime approach is that anything that opens the door to Chinese products is a strict no. So there is no surprise in turning its back to keeping out of the Regional Comprehensive Economic Partnership (RCEP) free trade agreement (FTA), an initiative India was engaged since its inception.
It theoretically comes with a minimum cost as India has FTA with all but three RCEP members. The RCEP was introduced during the 19th ASEAN meet in November 2011. The negotiations started in November 2012 at the 21st ASEAN summit, held in Cambodia. Home Minister Amit Shah had last month told the RCEP member countries that they will have to come around to accepting India’s terms. “Considering India’s growing stature, RCEP members can’t afford to ignore it for long, and will come around to agree to Government of India’s terms. Meanwhile, India has maintained successful economic relations with ASEAN by the means of FTA,” he said.
The RCEP also has kept the doors open for India officially. If it all India wants to join it without having to wait for 18 months as stipulated for new members. India still can as per RCEP decision participate as an observer.
India had taken the decision in November 2019 to keep off RCEP, being seen as China centric and with perception that it would boost merchandise sales of Chinese products. India’s approach on the deal comes as a result of unfavourable trade balances that it has with several RCEP members, with some of which it has FTAs. The commerce ministry finds the growth in trade (CAGR) with such countries was mere 7.1 per cent. India has trade deficits with 11 of the 15 RCEP countries. It means while the partners are having access to Indian market, India does not have it. It cannot open up its market for the advantage of others.
Still India is having agreements with the ASEAN, South Korea and Japan, negotiating deals with Australia, New Zealand and Singapore. Treaties are there with Nepal and Bhutan. There are apprehensions that RCEP could impact the Australia-India-Japan network in the Indo-Pacific. India and like-minded countries, particularly the Quad countries – Australia, US, Japan, are keen for resilient supply chains and are along with New Zealand, South Korea and Vietnam negotiating with each other.
External Affairs Minister S Jaishankar delivering the Ramnath Goenka lecture in 2019 had said that India’s stance was on a ‘clear-eyed calculation’ of the gains and costs entering a new arrangement. He also said that India would continue with its Act East policy.
It should also be remembered that the RCEP decision is linked to China’s aggressive postures in South China Sea and on the LAC, including the June 15, 2020 Galwan incident in which 20 Indian and many Chinese soldiers lost their lives. It may be recalled that Jaishankar even in January had said that its doors to RCEP were not closed. But in September, he said, “you cannot be a rising power without being a rising economy and to do that you have to build your domestic capacities”. His views are not very different from that of Swadeshi Jagran Manch, which had been opposing most FTAs and stressing on improving domestic economy.
It certainly has not been an easy decision. India would have to weigh the gains of a bulk agreement and individual treaties. Similar concern was being expressed when India chose to opt out of the Belt and Road Initiative in 2017. It was said that New Delhi might be isolating itself. Now after three years, like-minded democracies appreciate India for its prudent decision, which many finally see as an exploitative Chinese method and many members are not enjoying their stay in the BRI. There is the contrary view as well. It says that India’s economic decline occurred even as China’s economically and strategically important BRI went on to cover two-thirds of the world’s population.
China dominates the psyche of policy makers. India is highly dependent on China for imports of lithium ion batteries, antibiotics, PCs, colour TVs, solar cells and toys. Despite recent initiatives by Prime Minister Narendra Modi for improving domestic production on many of these, the concern remains. What China has done is to consolidate its economy since 1979. The production cost is lowest and it has a pricing mechanism that happens to be the lowest in any country – India or the US – in their currencies.
India has to learn the technique for creating a vibrant domestic system with a market across the world. Chinese merchandise today decides the international prices. While India successfully blocked imports of images and idols of Ganesh, Lakshmi and other deities, where it could not succeed is the consequent rise in prices of the India-produced items. This cannot be considered as good economy. Perhaps for this reason, China looms large in reports, submitted by eight groups of ministers (GoMs) formed during the COVID-19 pandemic. These have called for a balance between supporting the economic performance and geopolitics and most have focused on ways to counter China.
These call for contextualising issues such as China aggression on communication tools, need for specialised spokesperson on issues like China and environment and many other dependencies on China. The GoMs also call for multi-national corporations (MNCs) to make in India, high industrial support required on lines of China, Vietnam and Bangladesh. It may be noted China is supporting many hi-tech projects, including a critical bridge on the Padma river in Bangladesh.
The obsession with China whether one joins its initiative or keeps off is too apparent. Of late, despite all efforts, India’s policy approaches are China centric. India may have to rethink of reviving the planning process it gave up in 2014. The NITI Ayog, though is supposed to fill up that gap, has not been a proper replacement. With many flaws India’s planning process achieved for it a sustained pattern. The country needs to evolve a long-term policy prescription. India also has to consider moving out of growth centric approach and replace it by progress.
So RCEP or not, India has to have a holistic approach to economy. It needs a wider vision and approach for progress and imbibes policies that could give it an edge, growth or not. In short, it needs to reorient the policies for a long-term approach without ignoring the short-term needs. INFA