[Answered] “India’s next stage of growth requires a second growth engine of exports to Asian markets.” In the light of this critically examine whether India should join RCEP or not?

The proposed Regional Comprehensive Economic Partnership (RCEP) is gigantic in size and scope. It aims to create a free trade zone of 10 Asean nations and Australia, China, India, Japan, South Korea and New Zealand. This means a zero-customs duty zone in a geography that contributes 34% of global gross domestic product (GDP) and 40% of world trade. The region is also home to almost half of the world’s population and hold a great potential for India’s exports.

Why India should join the RCEP?

1. It will give New Delhi a chance to stall some of its unfair practices such as doling out subsidies unethically and stalling Indian pharmaceutical products, among others, on the pretext of quality control.
2. India can’t stand alone in the region. It has to be a part of the group.
3. It will boost Indian exports in the region and will generate employment.
4. This will help in furthering the aims and objectives of India’s own Act-East Policy.
5. RCEP will give Indian exporters a window to be a part of global value chains.
6. Indian industry has no option but to rise to the competition.
7. After RCEP, the nature of Indian businesses will change from family run ones to more of joint ventures.
8. India’s entry into such a giant club of economies will strengthen its strategic muscle.
9. This is a chance to bring in historic trade reforms, which in itself will cement India’s position as a major global economy.

Why India should not join RCEP?

1. RCEP will, remove customs duty on about 80-85% of items. The result will be that Chinese goods will flood the Indian market even more. Once the pact is enforced, India will give more market access to China and our trade deficit will increase further.
2. Assuming that India and China agree to eliminate customs duties on 85% of bilateral trade, Chinese goods imports worth $62.3 billion (85% of $73.3 billion) will become duty free. This will lead to an estimated loss of $6.2 billion to the exchequer, going by the fact that India’s average customs duty is 10%, assuming that the concessions are given at one go.
3. RCEP would favour ASEAN and Chinese interests more than Indian interest as these countries are already taking over as major exports centre in the new global order.
4. While trade deficit with ASEAN has grown four-fold during the implementation of ASEAN-India FTA, deficits with Japan and Korea have roughly doubled after the two CEPAs were implemented. Thus RCEP would further increase this deficit.

What should be done?

1. India should make multi-sectoral reforms in order to make its exports more competitive than other countries especially China.
2. India should try to ease and remove customs from Many products so as to make market more open for efficient and good products.
3. Instead of RCEP it’s better to go for better bilateral trade agreements with ASEAN countries in favour of India.
4. India should enhance its manufacturing and exports infrastructure and capabilities to make exports cheaper.

RCEP although is an ambitious trade project Amy jeopardise India’s interests and freedom in formulating trade policies on its favour. Overall impact of RCEP can be negative and may not be favourable for India.