Opportunities and challenges in biggest free trade zone
It’s an oft-stated view of India—a bullish, sanguine one—that PM Narendra Modi iterated in his online BRICS Summit speech on Tuesday. Briefly, it holds that India stands uniquely poised to play a key role in driving global economic recovery. Building deeper synergies among BRICS nations is a subset of that. If this is the worldview coming from the very top, it may seem counter-intuitive that New Delhi has decided to step away from the Regional Comprehensive Economic Partnership of 15 countries of the Asia-Pacific.
The newly minted RCEP, which links up the ASEAN powerhouses with China-Japan-South Korea as also Australia-New Zealand, accounts for 30% of the world economic output. This presents a difficult dilemma. By staying away from this macro-regional trade initiative, India has opted to build walls around itself—quite contrary to the spirit the PM talked about.
And yet, the domestic compulsions are very real. In the West, protectionism preserves the monopoly of giant lobbies, often with extremely wealthy members. But if India opens up to the RCEP’s liberal trade arrangements, those who will get hit are the small, vulnerable cogs that make up India’s mammoth jigsaw—those in the dairy sector, farmers whose crops yield our edible oils, MSMEs. Imported products swamping our markets, their flow eased by low tariffs, is an existential issue for them.
Yet, New Delhi should think twice—and creatively—before this becomes a lost opportunity. We could have negotiated a better deal for our people—offering them newer stakes, while immunising them in other ways. And imports of cheaper components could help Indian manufacturing—ramping up investment, benefiting the entire chain from producer to consumer, even driving exports eventually. Tapping into the Asia-Pacific network optimally could have as-yet unforeseen benefits. Openness and competition finally helps spur innovation and evolution. Being inward-looking keeps us static.