India to sign clean, fair economy deal under Indo-Pacific economic framework

India is expected to sign a much-awaited deal on two more pillars of the US-led Indo-Pacific Economic Framework—clean economy and fair economy—early next year, two officials aware of the matter said.

India’s law ministry is currently vetting proposals for IPEF’s clean economy and fair economy pillars, following which the commerce ministry will move for cabinet approval, the officials said.

“Both the pillars are very important for the country. The clean economy (Pillar-III of the IPEF) is aimed at cooperation on research, development and commercialisation of clean energy and climate-friendly technologies,” one of them said.

Under the fair economy deal (Pillar-IV), India will strengthen implementation of effective anti-corruption and tax measures to boost trade and investment among IPEF economies, the official added.

The ministries of finance and commerce did not reply to queries sent on Tuesday.

India in November signed a supply chain resilience agreement (Pillar II) with the US and 12 other members of the Indo-Pacific Economic Framework for Prosperity to reduce its dependence on China. It has so far stayed away from the trade pillar of the framework.

The agreement, which was signed by Union minister for commerce and industry Piyush Goyal and US trade secretary Gina Raimondo in San Francisco, also provides benefits such as a potential shifting of production centres in critical sectors.

The development was seen as a major breakthrough for India and other participating countries. Once the deal is finalised, it will help reduce India’s dependency on China and mitigate risks of economic disruptions from supply chain shocks.

India has not signed the trade pillar aimed at strengthening economic engagement among partner countries, excluding China, as it is seeking more clarity to assess if it will be in the interest of the country, said the second official mentioned earlier.

“The legal scrubbing of Pillar-III (clean economy) and Pillar-IV (fair economy) has started. The process of legal vetting may get completed by February. Then it will be moved to the Cabinet for final approval,” this official said.

Legal scrubbing is a process under which participating countries of the IPEF review proposals through a legal perspective and for language consistency.

Once the deal is legally approved, the commerce ministry will move a cabinet note in consultation with other ministries involved in the process, such as the ministries of finance and power.

“The IPEF framework will enhance inclusiveness and competitiveness and promote economic growth through investment,” said Abhash Kumar, assistant professor of economics at Delhi University. “It will benefit consumers also. Clean and fair economy will increase resilience in the economy, which is important for sustainable economic growth.”

IPEF was launched in Tokyo by the US and other Indo-Pacific countries on 23 May 2022. The group includes Australia, Brunei Darussalam, Fiji, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam.