India has indicated that it will no longer participate in the preparatory work for the establishment of the Asian Free Trade Area (RCEP) and that it will not join at a later date. But even without India, RCEP will be the largest free trade area in the world, accounting for almost a third of the global economy and almost a third of the world’s population.
At present, India’s current account balance is relatively stable overall and the slight decline of around 2% in gross domestic product gives little cause for concern. However, if we look only at trade in goods, i.e. the traditional trade balance, there is currently an enormous Indian trade deficit with China, which has almost quadrupled in the last ten years to around 58 billion US dollars – with total bilateral trade of around 95 billion US dollars.
The concern that cheap imported goods will continue to put domestic industry under pressure is probably justified. In addition, there are countless companies in India that have no export experience and need protection in case of doubt. However, Prime Minister Modi misses an opportunity here: because the opening of trade policy within the framework of RCEP would have served as a „catalyst“ for further growth-promoting structural reforms of the state due to the resulting intensification of competition, and could in turn have driven forward adjustment and modernization measures in Indian companies. India is reluctant to open up, which is unlikely to have a positive effect in the medium term.