released October 21, 2020

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Uncomfortable questions are cropping up following India's last-minute decision to withdraw from the proposed Regional Comprehensive Economic Partnership, or RCEP. Is India overly circumspect? Is it committing another historic blunder?
India, which had been party to the talks to create an enormous Asia-Pacific free trade area, pulled out of RCEP talks on Nov 4 amid fears of its lingering trade deficits and worries that opening its economy would undermine its already fragile domestic manufacturing base.
However, an Indian economist told China Daily that India's decision to back out of the RCEP - touted as the world's most wide-ranging free trade agreement - may signal that it lacks all interest in free trade agreements, or FTAs.
"It is surprising that India pulled out at the last minute after being in RCEP talks for seven years and 29 rounds. It shows India's limited interest in FTAs, and that, too, being purely defensive," said Amitendu Palit, senior research fellow and research lead at the Institute of South Asian Studies at the National University of Singapore.
The ten-member Association of Southeast Asian Nations is a party to the RCEP talks along with Australia, China, India, Japan, New Zealand and the Republic of Korea.
"India's nonparticipation in the RCEP is something which might turn out to be similar to the country's historic blunder - out of deliberate policy choice - of following an ideologically isolationist policy after World War II and the Cold War," Palit said, adding that India is losing out on an important economic and geostrategic opportunity.
As it now stands, the RCEP would cover almost 30 percent of the global economy. If India were to be included, it would cover about 32 percent.
Formerly on the staff of the Indian finance ministry, Palit said India had already lost a chance to be part of the Asian growth story by not taking other steps to better integrate with the Asia-Pacific region. "India might again commit a mistake of similar proportions now," he said.
But all is not lost, according to Bibek Ray Chaudhuri, associate professor at the Indian Institute of Foreign Trade. He noted that India has not shut the door on all RCEP negotiations, nor has it closed its options.
Given the potential of the RCEP market, India cannot afford to remain outside the trade bloc for too long, said Ray Chaudhuri.
However, Sugata Marjit, a professor at the autonomous India Institute of Foreign Trade, said the agreement held risks for India because the country has huge adverse trade balances with China, Japan and also ASEAN.
He said India's economy is poised for a slowdown and it was natural for the government of Prime Minister Narendra Modi to hold back from joining RCEP at this stage.
According to Ray Chaudhuri, it is a tough call for India to join the free trade bandwagon. "A negotiated entry by addressing its concerns is the best way forward for India," he said.
Palit of the Singapore institute said India has been one of the highest users of anti-dumping duties, mostly levied on Chinese imports. "Even then, however, India's imports from China remain high," he said.
"This is because India does not produce enough of either intermediate goods for production or final goods for consumption. This import dependence is going to continue. If not China, then it will be some other country," Palit said.
The author is an India-based freelancer for China Daily.

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