RCEP : An Opportunity or Threat for India

It was in 2014 when the new Indian Government was formed by humongous vote from the People of India,it started increasing her foreign policy to make it even better, the smallest example was converting mere look east policy to act east policy,  and it became more evident after India suffered regular terrorist attacks from Pakistan.  India made SAARC ineffective by not engaging and participating because of Pakistan's presence and it started more engagement with east, hence participation with ASEAN nation had increased.

India had made engagement with Asean nation so much that it even Envisage to construct tri national highway to connect India with Myanmar and Thailand.

Although plethora of projects have been going on by India on Asean nation in which most Important is Kaladan Multi model project which shouldn't been seen just a mere project with Myanmar but is being a very strategically very important as far as Indian northeastern security is concern.

Kaladan project is going to connect India's port in West Bengal to the Sittwe port in Myanmar through the Bay of Bengal and further by Kaladan River in Myanmar will going to connect India's Mizoram state, hence it is going to be so important for our security and trade that it Indian mainland would find alternative route to connect with North eastern state, means in time of any standoff with China,  The north Easter km state wouldn't been cut off from mainland India merely because China would be shelling their Artillery ammunition on the Siliguri corridor and would have been chocking our pathway towards Assam. Also this project is going to reduce the time and distance for the logistics supplies to and from our North eastern states and helped them to merge them more effectively with Rest of India. 

This project would have been possible only with a very good relation of India with Myanmar and because of Act east policy. 

The relationship of India with these Asean nation is always good in recent years,  be it be the Indonesian who had given its one island name Sabang to India to construct a port their so that India would be able to placed their Naval Ships and it become so important for India because this Sabang port is mere 500km ahead of World's one of the most strategically important Strait of Mellacca , which witnessed majority of world's trade and oil supply. Gaining access to the port near by to these important Strait would certainly give upper hand to India's defense and is the best answer to Chinese hegemony in the Indian Ocean and South China sea and String of pearls. 

Let me give me one more example ,this one the most recent one,  India with Russia had developed world's fastest Supersonic cruise missile " Brahmos" which no other nation would have been able to develop till now which can fly at a speed of 2.5 Mach and after becoming the member of Missile technology control regime, India  have been developing Hypersonic version of it. 

Few weeks ago,  India had made a defense agreement with The Philippines, the nation of Asean,  to supply them with Brahmos missile system , so it shows how India have been proving it's Act east policy pro actively.  

Now India had also each year Chairs the Indo Asean meet to put the relationship with Asean as a whole.

 India had done the Free trade Agreements FTA with Asean nation to make supply of Indian and Asean goods to be flown freely with a very least tarrifs and Taxes .

This FTA helped to merge the Indian market with South east Asian markets. 

Although with this FTA,  India found Itself under the Trade deficit which is hitting Indian domestic Market. 

In 2012 , the FTA plan had been conceptualize by the 16 Asia Pacific Nations, ( 10 Asean nation + India, China, Japan, S.Korea, Newzealand , Australia) , called as Regional comprehensive economic partnership (RCEP)  to make the market of Asia Pacific as a whole a single market like North Atlantic FTA and European Union. 

While under this FTA,  what was conceptualize was to integrate the market of these 16 Asia pacific nation with each other by making Import Tariff to either 0 or to reduce it by 90%.

By doing so,  The consumer of these countries would be benefited most. 

But each nation have their own interests hence after 2012 , lot of negotiations was done and finally recently  has been ratified by 15 countries in Bangkok in Asean summit and India decided herself to remain away from RCEP. 

As far as RCEP is concern  , it is the market of 8 times the market of India,  it accounts for nearly 50% population of world and 50%  GDP of world , means a humongous opportunity for trade for any country. 

So , does India made a mistake by Not gaining the access to this huge market ?

Well,  the opportunity was humongous for India but not so much fruitful for our businesses. 

India already had FTA with Asean nation in which Indian accounts a huge trade deficit with most of the 10 countries even though they are so incomparable with Indian GDP. 

India among the other 15 countries of RCEP,  india have been facing humongous trade deficit with  11 Nation worth of $105 Billion US $ and as China is concern, the trade deficit is highest worth $53 Billion. 

Trade deficit with most of the countries and even of such magnitude is a matter of great concern for India, as our market gain so less because of trade deficit and only help to grow the Industry of these countries.  

So with China, even India never had FTA & have always been so concern about the cheap Chinese goods , even with these much attention, we account $53B trade deficit . So imagine what would be the scenario if under RCEP, India would have signed FTA,  so with so less tariff, Cheap Chinese goods would have been flooded in Indian market and would have crashed our domestic industries so badly that all our Growth would have been stalled ,would be so difficult to reach $5 Trillion Economy in near future which India have been targeting till 2022. 

And look the Irony,  we are talking Trade deficit with China and I have been writing this Article on Chinese phone and probably you would have been reading this on a Chinese phone as well 😁.

We know South Korea, like China, they also account for having the world's best and cheapest industries for electronic manufacturing which India used to import in a huge quantities. 

Had this deal would been finalized last week,  then along with the Industrial and manufacturing sectors,  our Dairy farmer also would have been hit badly. 

As in Indian economy , Farming accounts a lot and dairy is one important pillar of Indian Farming. 

New zealand and Australia have very less population and have very advanced technically in Dairy farm,  hence their economy have a lot chunk of contribution of cheap dairy products like Cheese, Milk powder etc.  With this RCEP deal, India would be a huge market of benefit for this two nation and with this cheap Dairy products , our Dairy farmers would have crash so badly and 25% of contribution to GDP of farming would be dipped. 

All together,  if we see,  India with 135 Crore population would have a huge market for least populated countries like S Korea,  Aus,  NZ etc while India wouldn't have received much better but only increasing out trade deficit. 

While, for the Myopic vision,  Excluding from RCEP is best step India had taken but at the end India have to understand a simple fact that why we are having a tremendous trade deficit even with the countries which are uncomparable with us,  the simple reason being our Industrial technology are not competent enough to make the manufacturing with cheap cost as Chinese steel company used to do.
As India is very fine Service sector, but the steps have to be taken by Indian industries to be competent enough to make competition with the manufacturing sector of China too otherwise India would for the benefit of Domestic companies have to be in the state of protectionism.

India can't always afford to remain out with such great opportunity only because our manufacturing sectors can't compete with these county's manufacturing sector,  adopting protectionist policy in short term help our domestic industries but in long term it would make India out of focus in the Asia pacific region and in world and ultimately we would loose badly the access of world's largest market which could have give Indian economy humongous boost had Indian domestic market would have been competent.

The best way forward is to make ourself enable enough in terms of cost effectiveness and quality, so that Like China, India too would shift the world's focus towards its market and would benefited from any other partnership in future.