Economic Self-Harm

Context:   India’s act of pulling out from the Regional Comprehensive Economic Partnership (RCEP) trade agreement cannot be considered as a superior act of self-reliance.

An overview of  India’s reluctance in joining trade deals:

• Pulling out from RCEP Because India is insecure  about domestic competitiveness as a manufacturing economy and in parts of the agricultural sector.
• Failed to bag an India-European Union (EU) free-trade agreements (FTA): due to the Protectionist industry lobbies.

Advantages of joining the RCEP:

• Economic impact: Over two-thirds of the goods currently being traded in the RCEP countries will eventually be without tariffs and quotas.
• Simplification of rules: Rules about the place of origin and other such regulations will be simplified, allowing for more effective and robust supply chains within the RCEP countries.
• Trading integration: Though geopolitical atmosphere between India and China has been altered, the economic argument for trading integration has not been altered.

Adverse consequences of not joining RCEP: An Economic Self-Harm

• Exclusion of India from the trading blocs: India will be unable to reap the benefits of the rise in the free trade while its partners like Japan will enrich China impacting strategic calculus for India.
  • A trade agreement with the inward-looking US looks even further away.
• Promotion of protectionism: The government’s policies have turned protectionist, with a series of import tariffs, restrictions, and production-linked incentives now ring-fencing a number of sectors.

Conclusion: Self-reliance is not a superior alternative to open trade and points the economy as well as policy in the wrong direction.