Last week, Narendra Modi cut off India's participation in what was believed to be the world's largest trade deal, the Regional Comprehensive Economic Partnership or RCEP. At a Bangkok summit where 16 nations were to approve the deal, Modi withdrew with typical theatricality, declaring, "Neither Gandhiji's talisman nor my conscience allows me to join the RCEP." Like the right hook of demonetisation, the decision of the prime minister came out of the blue and, like the radical change in the Rafale fighter agreement with France, it left his cabinet colleagues compromised.
"India sees RCEP as a logical extension of its East Policy Act and it holds tremendous potential for economic growth and stability for the region as a whole," Commerce Minister Piyush Goyal, the government's point man for negotiations, said back in July. After a ministerial meeting last month to finalize India's approach to the deal, Goyal said, "If India remains out of RCEP, we will remain isolated from this large trading bloc.
Thankfully, the legacy media, as always willing to portray the episode as a victory for Modi, largely ignored the possible consequences of what Goyal had defined as the isolation of India. Nonetheless, questions need to be asked, among them: why were we unable to support our agriculture and industry enough to be sure that they could withstand imports? Why are we unable to manufacture most products at competitive prices, despite government programs such as Make In India and Skill India? Why did India find insufficient merit in RCEP when nations with a wide variety of economies in very different stages of development, from Myanmar and Cambodia, through Malaysia and China, to Japan and Australia, believe it is in their interest to sign? Why have India's negotiating teams failed to secure our interests on a range of issues from data localization to the protection of the dairy industry despite years of discussion?
We have cut ourselves off from the world's largest infrastructure program, the Belt and Road Initiative, under the current regime. Doubling this disengagement by dissociating RCEP will have serious consequences. Investors who want to build factories with export-oriented goods will think twice about locating them in India, and Indian entrepreneurs will increase investment in RCEP-party nations that promote access to large markets.
The difficult economic situation, which is the best argument to push forward with ambitious global engagement, is also the greatest reason to retreat, the reasoning being that under a fresh wave of imports, weakened industries could collapse.
Tags : Narendra Modi, Regional Comprehensive Economic Partnership, Bangkok, Commerce Minister Piyush Goyal,