"According to officials, India was hopeful of striking a tariff-cutting deal this year, in the clearest indication yet that India wants to accelerate progress on a bloc first launched in 2012. Ganeshan Wignaraja of the Asian Development Bank (ADB) feels a breakthrough on RCEP would help mitigate the competitive disadvantage of India being absent from the TPP. Concluding an RCEP agreement would mark a key milestone for the Modi government"
Concerned at being sidelined from the US-led Trans-Pacific Partnership (TPP), India is stepping up efforts to reach agreement with an alternative trade bloc centered around China, and hopes to reach a deal this year. India has long been seen by many countries as an intransigent player at the World Trade Organization (WTO), a multilateral forum that has struggled to find the consensus it needs to move forward. With 12 advanced economies accounting for 40 per cent of the global economy signed a TPP deal this month, India’s trade negotiators feel they need to get a move on, as Prime Minister Narendra Modi’s export-focused ‘Make in India’ drive as the path to prosperity for Asia’s third-largest economy, where per capita output is $1,688 a year, one fifth that in China.
Exploring access to Asian markets
With TPP out of reach, India was not invited to join, India’s negotiators are focusing instead on a Chinese-led grouping called the Regional Comprehensive Economic Partnership (RCEP) that would improve its access to Asian markets. To iron out differences on tariffs, a trade representatives meet is scheduled in Brunei from February 15 to 19.
According to officials, India was hopeful of striking a tariff-cutting deal this year, in the clearest indication yet that India wants to accelerate progress on a bloc first launched in 2012. Ganeshan Wignaraja of the Asian Development Bank (ADB) feels a breakthrough on RCEP would help mitigate the competitive disadvantage of India being absent from the TPP. Concluding an RCEP agreement would mark a key milestone for the Modi government.
Experts caution that India has shown little appetite to open its market to imports, even as it seeks to ramp up exports, not least because of a gaping trade deficit with China. Some experts feel, India is worried about opening up to China and so there is cloud over whether RCEP deal would happen this year. With the TPP lacking votes in the US Congress and likely to be put on hold if a Republican is elected US president, any sign China is seizing the initiative in the trade arena could raise concerns over Washington’s declining clout in Asia. Meanwhile, with backing from close US allies like Britain, Beijing has already redrawn the financial map by launching the Asian Infrastructure Investment Bank (AIIB).
Fear of losing business
Even though TPP is years away from reality, New Delhi fears losing some textile and drugs exports to countries like Vietnam, which has embraced both the TPP and the RCEP. Officials point out, it could also raise barriers to entry on labour, environment and intellectual property when it comes to seeking access to other markets.
The TPP will certainly have an impact on India’s exports, believes commerce minister Nirmala Sitharaman said. It is most likely to affect sectors like leather goods, plastics, chemicals, textiles and clothing. Talks on creating the 16-member RCEP could be the last hope for some Indian companies to break into the global supply chain. The group comprises the 10 members of the Association of Southeast Asian Nations (ASEAN), China, Japan, South Korea, India, Australia and New Zealand. If signed, the regional free trade agreement would create an economic bloc with a population of 3.4 billion and trade volume of over $17 trillion.
Export industries, particularly garment and drug makers, are urging the Centre to speed up RCEP talks and wrap up trade deals with the European Union and Australia. But steel, tyre and chemical firms want the Centre to go slow, saying they have been undercut by free trade pacts already done with ASEAN, South Korea, Thailand and Japan.
Indian merchandise exports have fallen for 13 months in a row, depressed by weakening global demand and slumping commodity prices. To boost the country’s stagnant 1.7 per cent share of global exports, India needs to raise productivity and move up the value chain.