India's stance on RCEP (Regional Comprehensive Economic Partnership) might impact its competitiveness Globally

RCEP

Post MBA exam results, Group Discussion will be crucial for MBA admission so it is advised to read and practice with variety of topics. In following GD Topic you will be getting some points with divergent views which you can pick up and develop.

Today, you will read GD topic:

"India's stance on RCEP (Regional Comprehensive Economic Partnership) might impact its competitiveness Globally"

India’s refusal to join the Regional Comprehensive Economic Partnership (RCEP) is being applauded by some for not compromising the country’s interest. At the same time, this decision has also raised fears of the country’s global competitiveness being affected in the long-run. This article takes cognisance of some of these views.

What is RCEP?

The Regional Comprehensive Economic Partnership (RCEP) aims to create an integrated market with 16 countries as members, namely Cambodia, Brunei,    Laos, Malaysia, India, China, Japan, Myanmar, Singapore, Thailand, Vietnam, South Korea, New Zealand and the Philippines, Indonesia and Australia, to make exchange of goods and services of these countries accessible to all others in the group.

India Says No to RCEP

India decided against joining the RCEP at the 3rd RCEP Summit, held in November 2019. Some of the core concerns that India had, which the RCEP Agreement failed to address were:

  • The government feared that signing the RCEP Agreement would result in a flood of imports from countries such as China. This might put India’s domestic industry and agriculture at risk.
  • The country had a trade deficit of nearly $105 billion with the other members of the RCEP. The rise in imports would have skewed this deficit further.
  • The RCEP Agreement would have done no favour to the government’s flagship programme “Make in India” in any way.
  • India wanted certain safeguards to protect its industry and farmers, which weren’t provided to its satisfaction.

Impact of RCEP on India’s Competitiveness

India’s reluctance to join the RCEP Agreement rests on the fear that the domestic industry will collapse in the face of an upsurge of imports from the RCEP signatory countries, in particular, China. However, the liberalisation experience has only proved that the Indian industrial sector has only shown an improved competitiveness. Also, trade diversion to the other 15 countries who have signed the RCEP Agreement except India is likely to dent India substantially.

Once the Agreement comes into force without India, the other countries will have little incentive to accommodate India’s concerns and India will lose out on access to higher quality products from other countries at lower prices. History has shown that India has not benefitted from protectionist policies but liberal ones.

Gain from RCEP

  • A section of the industry feel that becoming a part of RCEP would have given India access to other markets. Indian goods would have reached newer markets.  
  • The efficiency of the industry is likely to improve in the face of competition from other countries.
  • The RCEP Agreement holds a lot of potential for the country’s services sector, especially for software and ICT.
  • Signing the RCEP could have given a boost to domestic demand and consumption.
  • Indian markets and consumers would have got access to higher quality products at low prices.
  • It would have given an opportunity to India to set its house in order and implement structural reforms to strengthen the domestic industrial sector.

There still remains a chance for India to become a member of the RCEP Agreement. In any case, it will have to continue to trade with these countries, so it might as well receive all the benefits that RCEP carries with it.

 

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