India’s decision to stay out of the Regional Comprehensive Economic Partnership (RCEP) may have cost it access to the world’s most critical supply chains without meaningfully reducing dependence on Chinese imports, according to Taimur Baig, Chief Economist and Managing Director at DBS Bank.
Baig told TNIE that fears of Chinese dumping likely influenced India’s decision to opt out of the Asia-Pacific trade bloc, but argued that the strategy has not delivered the intended outcome.
“Remaining outside RCEP has not reduced India’s dependency on imports from China in a meaningful manner,” Baig said, adding that India lost out on export opportunities linked to East Asia’s electronics manufacturing boom.
“I think that concerns about Chinese products flooding Indian markets may have been a part of India's decision not to be a part of RCEP. That was probably a strategic mistake, as the fear of dumping got in the way of being part of the world’s most critical supply chain,” he said.
The remarks come at a time when India is pursuing multiple bilateral trade agreements and reconsidering aspects of its trade strategy amid global supply chain realignments, geopolitical tensions and the ongoing AI-led electronics supercycle.
Baig noted that East Asian electronics producers are witnessing a surge in exports driven by rising demand linked to artificial intelligence technologies, and India could have benefited significantly had it been part of RCEP.
“Today, East Asia’s electronics producers are seeing a sharp rise in exports due to the AI-wave driven super cycle; India could have been a beneficiary of that wave if it was inside RCEP,” he said.
India withdrew from RCEP negotiations in 2019 citing concerns over market access, trade imbalances and the risk of cheap imports, particularly from China. However, Baig argued that India’s trade deficit with China remains substantial despite staying outside the bloc.
“The downside consideration that got in the way of RCEP was not mitigated, while the exports upside was lost. The trade deficit remains substantial. Dependence on tech transfer remains critical,” he said, adding that “it’s time to rethink India’s membership in RCEP.”
Baig also backed India’s recent move to ease certain restrictions under Press Note 3, which had tightened scrutiny on investments from neighbouring countries after the India-China border tensions in 2020.
He said geographically contiguous economies naturally become strong trade partners and India should deepen economic integration with South Asian neighbours including Bangladesh, Sri Lanka and Myanmar.
“There are substantial synergies to be had by India forming a deeper trade relationship with Sri Lanka, with Bangladesh, with Myanmar and others,” he said.
On concerns around widening trade deficits under free trade agreements, including with the UAE, Baig said trade deficits should not automatically be viewed negatively.
“I don't subscribe to the idea that trade deficit is necessarily a problem. I think the quality of the trade deficit is a critical issue,” he said.
According to him, deficits arising from imports of capital goods, technology and energy infrastructure can help build long-term productive capacity, unlike deficits driven by luxury consumption.
“If a country is running a large deficit on the back of critical imports and capital goods, then I think it's a good trade deficit,” he said.
Baig also stressed that future trade agreements should remain aligned with World Trade Organization rules to address concerns related to dumping, intellectual property and dispute resolution mechanisms.
“Creating FTAs, bilateral or multilateral, on the back of WTO-compliant rules would take care of those issues,” he said.
On the ongoing West Asia crisis and risks to energy supply chains, Baig highlighted refining bottlenecks as a major concern for Asian economies. He said countries such as South Korea, China and Singapore possess significant refining capacity that could help cushion disruptions.
He added that India’s refining capabilities have improved substantially over the years, making the country more resilient to global energy shocks than it was a decade ago.