India and the RCEP

COVID-19 has widely affected global supply and value chains, and specific sectors around the world. In this scenario, the options for India to optimise its regional and global value chain linkages with the Regional Comprehensive Economic Partnership are examined, which in turn could aid in its post-pandemic recovery.

The Regional Comprehensive Economic Partnership (RCEP) agreement was signed in November 2020 by the 10 Association of Southeast Asian Nations (ASEAN) member states and five dialogue partners of the ASEAN (that is, Australia, China, Japan, Republic of Korea and New Zealand). Though India was one of the negotiating partner countries of the RCEP, when the other RCEP countries reached an in-principle agreement in November 2019, India made a decision to not join it. While the level of additional market access that could be attained through the RCEP agreement is still being analysed, the fact remains that India, its domestic structural economic issues notwithstanding, has missed an opportunity to be a part of what is being touted as a geopolitically significant, world’s largest free trade agreement (FTA).

The RCEP agreement was signed in the midst of the COVID-19 pandemic which has wreaked havoc on the world economy. The International Monetary Fund (IMF) has projected that the Indian economy will shrink by 10.3% in 2020, higher than the average fall experienced by emerging markets and developing economies (IMF 2020). India’s trade has undergone even sharper decline than its GDP in 2020: India’s merchandise exports fell by 17.76% to $173.6 billion; merchandise imports fell by 33.5% to $215.6 billion during the period from April to November 2020. While most manufacturing sectors in India experienced a fall, one sector that has seen notable growth in exports is drugs and pharmaceutical (growing by 22.6% during April to November 2020) (MOCI 2020).