India, which held marathon talks in Bangkok over the weekend, has set the stage for intense last-minute negotiations to protect its interests when Prime Minister Narendra Modi meets leaders from 15 other countries on Monday to stitch together the world’s largest trade deal, the Regional Comprehensive Economic Partnership (RCEP).
Modi will review if the shape of the trade deal as it stands on Monday adequately addresses India’s concerns before making any announcement on joining the deal with countries accounting for a third of global economic output and half of the world’s population. RCEP negotiating partners include 10 South-East Asian economies and six others—China, Australia, Japan, South Korea, New Zealand and India. Commerce and industry minister Piyush Goyal has been holding talks with RCEP trade ministers in the run-up to Monday’s summit.
The intense negotiations come in the wake of a deep economic slowdown in Asia’s third largest economy, which makes it harder for policymakers to further open up the market to imports. Also, the trade deal is politically sensitive with the Opposition Congress and trade unions opposing it. The government is keen to have the deal designed in such a way that it does not hurt local industry and farmers because of a possible surge in imports of goods from China and dairy and agriculture products from New Zealand and Australia.
It makes little sense to sign the deal unless the concerns that India has been raising are fully addressed, said experts. “It will be very difficult for the Indian economy, which is losing momentum, to deal with the kind of demands other negotiating partners are reportedly making. If tariffs are cut deeply across the board, safeguards for a few products will not be sufficient. Our negotiating partners should respect our sensitivities," said Biswajit Dhar, an expert on international trade and professor of economics at Jawaharlal Nehru University.
Modi had, in an interview published in Bangkok Post on Saturday, indicated India’s concerns in backing the trade deal. These included addressing the unsustainable trade deficit India has with countries such as China, the need for partner countries to open up their labour market for Indian workers and reciprocate our opening up of the market so that Indian businesses can benefit in other areas. India had a trade deficit of $53 billion with China in FY19, Mint reported on 23 October.
“We have put forward reasonable proposals in a clear manner and are engaged in negotiations with sincerity. We would like to see commensurate levels of ambition on services from many of our partners, even as we are ready to address their sensitivities," Modi said in the interview shared by the Press Information Bureau.
India had made last-minute requests to trading partners, Bloomberg had reported last week quoting people familiar with the development.
Modi had said prior to leaving for Bangkok that at the RCEP summit India will take stock of the progress in talks and will consider all issues, including whether India’s concerns and interests in trade in goods, services, and investments are being fully accommodated.
Small businesses see the proposed trade deal with trepidation. Opening up the market further would lead to dumping of products from China, according to Chandrakant Salunkhe, founder and president of the SME Chamber of India. “Has the government created a level-playing field for small businesses to compete with the imports? India aims to raise the economy’s size to $5 trillion. We need to ask ourselves if free trade will adversely impact this goal or will advance it," said Salunkhe.