Without simultaneous steps to raise productivity, passive acceptance of lost competitiveness has shaped India’s approach
India’s last-minute withdrawal from the Regional Comprehensive Economic Partnership agreement has elicited much commentary. That it happened after exciting positive signals from senior government functionaries amidst vociferous opposition by noted lobby groups surprised all. A sizeable segment, however, backs the retreat, noting India’s current economic situation and low competitiveness to describe it as economic and political pragmatism. Another strand is critical, arguing that joining the trade partnership would have compelled long-pending structural reforms, which would have been beneficial for India in spurring manufacturing and mass job creation. Both views are valid in the Indian context: governments repeatedly fail to draw aggressive, reform-based trade strategy for fear of potential political costs. In the event, the back-off can be viewed positively. The portend for India’s future, however, is that the demographic dividend may well be squandered as the country’s political class ties it down to this fate.
Consider that the RCEP engagement started seven years ago — in 2012. The clear objective of the 16 participating nations — 10 members of the Asean group and six others, including India — was to significantly reduce or completely eliminate all tariff and non-tariff barriers on imports-exports for a regional trade arrangement to everyone’s benefit. What was India’s strategy towards these goals? Did governments evolve one?
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