Why India Didn't Join RCEP: A Detailed Analysis

[YAGAY andSUN]

On November 15, 2020, fifteen Asia-Pacific nations came together to sign the Regional Comprehensive Economic Partnership (RCEP), forming the world’s largest free trade agreement. Surprisingly, India, a major player in the region and an original participant in the negotiations, opted to walk away from the deal in late 2019. This decision stirred significant discussion and debate, both domestically and internationally. To understand why India did not join RCEP, one must delve into a range of economic, strategic, and political considerations.

1. Trade Deficit Concerns

India’s foremost worry centered on its already lopsided trade balance with many RCEP members, especially China. India had a trade deficit with 11 out of the 15 countries in the pact, and the fear was that further tariff liberalization would worsen this imbalance. In particular, Indian manufacturers and farmers were apprehensive about an influx of cheaper goods—especially from China—undercutting domestic producers and flooding local markets.

For instance, Indian industry had long struggled to compete with Chinese imports in sectors like electronics, chemicals, and textiles. A zero-duty regime under RCEP would likely have exacerbated these challenges, making Indian products even less competitive.

2. Agricultural and Dairy Sector Vulnerabilities

Another critical sticking point was India's vulnerable agriculture and dairy sectors. India’s rural economy is heavily dependent on small-scale farmers, many of whom rely on government protections and subsidies. Entry into RCEP risked exposing these sectors to global competition, particularly from countries like Australia and New Zealand with highly efficient dairy industries.

Indian dairy cooperatives, expressed strong opposition to the deal, fearing it would undermine their market share and hurt millions of rural livelihoods. The government, wary of political backlash and the socio-economic impact, viewed these concerns seriously.

3. Lack of Safeguards and Assurances

India repeatedly emphasized the need for clear, enforceable safeguards within the RCEP framework to protect against sudden import surges and unfair trade practices. However, according to Indian negotiators, the final agreement lacked adequate provisions to address these issues. Without robust mechanisms for dispute resolution or correction of imbalances, India was hesitant to commit.

In particular, there was concern that RCEP’s rules of origin provisions were not stringent enough, potentially allowing non-member countries to route their goods through member nations—essentially a backdoor for Chinese goods into the Indian market.

4. Non-Tariff Barriers and Services Trade Imbalance

India’s strength lies in its services sector, particularly IT and skilled labor mobility. During negotiations, India pushed for greater access for its professionals in areas like finance, healthcare, and engineering. However, RCEP did not offer significant liberalization in services trade. Many member countries, including those with restrictive labor and visa regimes, were reluctant to open up.

At the same time, Indian exporters frequently face non-tariff barriers such as quality standards and bureaucratic red tape in RCEP countries. The lack of meaningful progress in resolving these issues added to India’s skepticism.

5. Geopolitical and Strategic Dimensions

India's withdrawal also reflected shifting geopolitical calculations. The deteriorating relationship with China, especially following border tensions and military clashes in Ladakh in 2020, significantly influenced India’s strategic posture. Joining a China-dominated trade bloc was increasingly viewed as counterintuitive to India’s security interests.

Moreover, India has been trying to strengthen its role in alternative groupings like the Quad (comprising the U.S., Japan, Australia, and India) and to build bilateral trade ties that align better with its long-term vision.

6. The 'Atmanirbhar Bharat' Doctrine

Prime Minister Narendra Modi’s emphasis on “Atmanirbhar Bharat” (self-reliant India) marked a broader shift in economic policy. This initiative promotes domestic manufacturing, reduced dependency on imports, and a calibrated approach to globalization. RCEP, which involves significant trade liberalization, was seen as incompatible with this new direction.

The decision to opt out of RCEP aligned with a more cautious, protection-oriented trade policy that seeks to balance global integration with domestic capability building.

7. Room for Future Engagement

Despite its withdrawal, India has not permanently shut the door on RCEP. The final agreement explicitly leaves room for India to join at a later date. RCEP members have expressed hope that India will reconsider its decision when circumstances change. In the meantime, India continues to engage with individual members through bilateral free trade agreements and dialogues.

Conclusion

India’s decision not to join RCEP was shaped by a confluence of economic concerns, domestic political considerations, and strategic imperatives. While critics argue that India missed an opportunity to integrate more deeply with the global economy, supporters believe the move protected vulnerable sectors and preserved India’s policy autonomy. Whether India will eventually join RCEP remains an open question, but for now, the country is charting a more cautious and self-reliant path in the global trade arena.