Question: Domestic sentiments must not overpower India’s orientation against joining RCEP. Analyse cost-benefits of joining RCEP for India.
Answer: Regional Comprehensive Economic Partnership is a 16 member trade grouping that aims to establish a uniform and free trade regime between countries of ASEAN, China, Japan, South Korea, Australia, New Zealand, and India. Indian domestic industries are against signing of RCEP due to fear of economic takeover by international companies.
Benefits of joining RCEP
- Economic integration
RCEP will allow Indian economy to integrate with economies of member countries. This will enable domestic companies to explore new overseas market and allow them competitive chance to expand their business and subsequent profits.
- Technological upgradation
The south east Asian economies are technologically advanced economies especially Japan, China, and South Korea. Exposure to these markets will allow Indian companies to upgrade their technology so that costs can be cut and profits can be maximised.
- Consumer benefits
Indian domestic consumers will have more options of buying a product at variable price with better aspects. This competition will allow Indian companies to evolve and develop superior edge that will distinguish it on a global scale.
- Product dumping
It is assumed that China will make use of RCEP to dump cheap goods in Indian market that will put domestic companies at disadvantage. Due to export subsidies and favourable exchange rate, Chinese companies will be at advantage in comparison to local companies.
- Trade Deficit
RCEP is expected to widen India’s trade deficit with countries such as China, Japan, Vietnam, Thailand, etc that are at advantage when compared to India in manufacturing sector. While India can also increase its export, costs of local products in these countries will not allow Indian products to gain advantage.
India must make efforts to shield domestic economy by implementing sensitive list so that agricultural sector do not suffer under RCEP when it will be implemented.
Thus, RCEP can be joined only if certain modified changes are undertaken. Member countries have shown that they are flexible to allow changes for India’s joining.