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India’s rejection of RCEP and free trade will make it poorer and less relevant
- The Regional Comprehensive Economic Partnership was an opportunity to recapture India’s success through economic liberalisation
- India now finds itself isolated and has compromised its influence in a region where economic integration has become a top priority for most countries
“The effect of past trade agreements has been to deindustrialise some sectors,” he said. “The consequences of future ones would lock us into global commitments, many of them not to our advantage.”
Some people might see Jaishankar’s comments as a jibe at China. Indians often complain that the Chinese unfairly subsidise domestic production and then dump their products in the Indian market. Indians also argue that, while China is able to dump its manufactured goods in India, Indian exports in the pharmaceutical and information technology sectors are subject to crippling restrictions by China.
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RCEP: 15 Asia-Pacific countries sign world’s largest free-trade deal
As a result, despite being the world’s fifth-largest economy, India is not even among the world’s top 10 trading powers. This is all the more bizarre when one realises that trade was a large part of India’s post-liberalisation growth burst in the 1990s.
In 1988, India’s trade accounted for about 13.5 per cent of its GDP and, 10 years later, it was as much as 24 per cent. Service trade more than doubled as a percentage of GDP and, not surprisingly, India’s real GDP increased by nearly 70 per cent in those 10 years.
This was in stark contrast to the dawdling economic progress made under its protectionist import substitution policies through the 1960s and 1970s. In the 1960s, India’s real GDP only increased by about 40 per cent in 10 years. In the following decade, it rose by a little over a quarter.
The fact India was not sufficiently confident about its domestic economy to sign up to even such an unambitious deal is worrying and will send the wrong signals to foreign investors.
Worse, Jaishankar’s caustic tirade is likely to undermine India’s already floundering trade negotiations with the rest of the world. Indian diplomats are, for instance, working hard to convince the European Union of New Delhi’s commitment to more openness.
For these reasons, nations such as Japan were strong advocates for India’s inclusion in the RCEP, even after New Delhi walked out of discussions last year.
Now, however, India finds itself isolated and has significantly compromised its influence in a region where economic integration has become a top priority for most.
Meanwhile, even relative to the US, India might now find its antitrade posture out of resonance. As part of his renewed outreach in the Asia-Pacific, US President-elect Joe Biden is likely to consider rejoining the TPP – a deal he championed as vice-president in the Obama administration.
Trade and globalisation are key interests among Asia-Pacific nations. If New Delhi aspires for regional leadership and influence, it has to recognise this and present itself as a willing partner in region-wide economic integration. If it isolates itself through protectionist rhetoric under the guise of self-reliance, it is likely to pay a heavy economic price and will render itself less relevant in Asian geopolitics.
Mohamed Zeeshan is editor-in-chief of Freedom Gazette. He has previously worked at the United Nations and his first book, “Flying Blind: India’s Quest for Global Leadership”, will be out soon
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