India withdraws from RCEP halfway

On November 15, the Regional Comprehensive Economic Partnership Agreement (RCEP) covering 10 ASEAN countries and 15 countries including China, Japan, South Korea, Australia and New Zealand was signed. The agreement was supposed to involve 16 countries in negotiations, but India decided to withdraw. According to the Indian media, it is regrettable that India has become extremely protectionist in the past few years, and India cannot afford the consequences of doing so.

According to the Indian Business Standard report, although the Indian government has made remarks in support of globalization and commercial cooperation, in the past few years, the Indian government has turned to a sharp protectionist stance. This practice of India makes people recall that India implemented a closed policy in the 1970s and imports were strictly controlled, which led to slow economic growth. According to the federal budget recently announced by the Indian government, India will raise import tariffs across the board. This is something that India has never done since opening up to the world in 1991.

India has boycotted foreign products since the 1930s and has strictly controlled imports in the decades before 1991. Indian politicians firmly believe that if they buy something from abroad, they deceive their country to some extent. These Indian politicians also defended India's withdrawal from RCEP, claiming that the previous free trade agreement harmed India. This is also the attitude of the new government since it was elected in 2014. It has reassessed every free trade agreement signed by India. Officials from politically powerful domestic industry lobby groups argued that some of these trade agreements led to an increase in India’s imports rather than an increase in exports.

However, there are two problems with the reasoning of Indian politicians. According to Indian media first of all Indian exporters are not aware of the benefits of free trade. In 2019, the Indian government urgently established the "Free Trade Agreement Utilization Mission" to correct this situation. Second, just because imports have grown more than exports, it does not mean that India has been hurt. Indians obtained more and cheaper goods through free trade. For example, in the past, the volatility of cooking oil prices was a continuing source of tension in Indian family relations and one of the most important drivers of consumer price inflation. The situation has improved due to import convenience.

Not only that, India simply cannot afford to give up the consequences of free trade. According to Indian media, first of all, India's domestic demand is not enough to promote India's growth. The Indian market may be huge, but as Modi’s former chief economic adviser said in a recent column, Foreign demand will always exceed domestic demand which means that India needs to resist the misleading temptation of the domestic market. At the same time, the global trade order has been disrupted by the pandemic, and the world is exploring new supply chains, establishing new connections, and building trade infrastructure that can last for decades.

Note: - This article is made up on the basis of foreign medias views. This article is not for criticizing any government