A recent report by the Global Trade Research Initiative (GTRI) has reignited the debate on India’s potential rejoining of the Regional Comprehensive Economic Partnership (RCEP). The think tank warns that such a move could have far-reaching consequences for domestic industries, particularly Micro, Small, and Medium Enterprises (MSMEs).
GTRI expresses concerns that India’s accession to RCEP could undermine its position as a preferred investment destination for businesses seeking to diversify supply chains away from China. The influx of tariff-free Chinese goods, the report suggests, could overwhelm domestic MSMEs, which may struggle to compete with China’s mass production capabilities.
The think tank also highlights the risk of capital flight from India’s manufacturing sector. Domestic investors, it argues, may be tempted to shift their operations to other RCEP member countries, where they could benefit from preferential market access and lower production costs.
India had previously opted out of RCEP in 2019 due to concerns over its widening trade deficit with China. Despite recent calls from the Niti Aayog to reconsider this decision, GTRI maintains that the potential benefits of joining the bloc are minimal and outweighed by the risks.
The World Bank, too, has urged India to reassess its stance on RCEP. However, GTRI emphasises that India must first undertake significant domestic reforms to streamline trade processes, improve infrastructure, and enhance operational efficiency. Only then can it truly capitalise on the opportunities offered by regional economic integration.
While India already has FTAs with most RCEP members, the report argues that joining the bloc would not significantly expand its export markets, especially to China. The focus, GTRI suggests, should be on targeted measures to improve India’s competitiveness rather than joining expansive trade agreements.
By carefully weighing the potential costs and benefits of RCEP membership, India can make an informed decision that aligns with its long-term economic goals and protects the interests of its domestic industries.
