The politics behind India's no to RCEP deal

The decision has political significance, coming in the backdrop of growing clamour over the state of the economy. The development comes just a fortnight after ruling Bharatiya Janata Party's (BJP) below-expected performance in state polls and less than two weeks ahead of the crucial winter session of Parliament.

One of the key factors that played a part in the decision was that there were no assurances on getting access to markets like China while the trade pact would have opened up India's market, a person familiar with the RCEP talks said.

"I don't think we got any assurances that Chinese goods would not overwhelm our market. That would have had a major impact on our domestic industries especially the small and medium scale sector," the person said. "There was a lot of concern expressed by our industry representatives that joining RCEP would have meant incurring a greater trade deficit with China which has great competence in the manufacturing sector."

That the government was not able to convince sections within the party and its larger fold also played a part, the person cited above said pointing to statements by groups allied to the BJP in recent weeks.

Opposition to the possible signing of the deal came from Swadeshi Jagran Manch (SJM) and Bharatiya Kisan Sangh (BKS), the two affiliates of RSS, the ideological parent of BJP. The SJM put out a press note saying the decision would favour the country's small businesses, farmers, dairy, data security and manufacturing sector.

“SJM believes that the RCEP would have undone various good works done by the NDA government under PM Modi in last six months. The agreement would have killed the Make In India, Digital India, Skill India and various other avenues of job creation. After coming out of the RCEP negotiations; we request the government to review the faulty Free Trade Agreements (FTAs) and CEPA done with Japan, South Korea, and other countries," Ashwani Mahajan, national co-convenor of SJM said in a press note.

Soon after the decision, top leadership of the union government said the move was made keeping national interest in mind and that it would benefit farmers particularly. “India’s decision to not sign RCEP is a result of PM Narendra Modi’s strong leadership & unflinching resolve to ensure national interest in all circumstances. It shall ensure support to our farmers, MSMEs, dairy & manufacturing sector, pharmaceutical, steel & chemical industries," home minister Amit Shah tweeted.

Congress' charge was led by its president Sonia Gandhi who, on Saturday, said the Indian economy was 'under siege' and signing of RCEP will deal a 'body blow' to it. Congress had also announced that it would raise the issue in a series of ground protests.

The party welcomed the move of signing out of RCEP but criticized the government for having double standards over the interests of farmers and small traders. “BJP Govt had gone overboard in their zeal to sign RCEP completely bartering the interests of farmers,fishermen & MSME’s. As BJP and Amit Shah indulge in fake credit seeking today, let them remember that Congress' forceful opposition made them back down," Randeep Singh Surjewala said in a tweet late Monday.

Just hours before Monday’s development, at least a dozen opposition parties also warned the government of the negative impact of joining the deal at a time when the Indian economy was “in a shambles".

Jaimini Bhagwati, former Indian high commissioner to the UK, said “Clearly, lack of reciprocity with China and concern about even greater trade imbalance with that country was one of the significant concerns," that made India pull out of the RCEP.

“Plus we do not seem to have negotiated well by keeping our Asian trading partners well informed about our sensitivities sufficiently well in time," he said.

“It is a major missed opportunity. India needed to move ahead in the last 5 years towards further land, labour, legal reforms and reducing the extent to which the Indian Rupee is overvalued. Any deal with US if and when it happens, has to be supplemented with a trade pact like RCEP. It is not either-or. Europe, as a bloc, is still India's largest trading partner as compared to other individual countries. It is more than high time that India should have concluded its trade pact with the European Union. Latin America is distant and will over time become more important. However, cannot overshadow Asia, Europe or the US (that is the pecking order) even in the medium term."