India may be forced to take reconsider its engagement with the China-dominated Regional Comprehensive Economic Partnership (RCEP) trade grouping, with domestic industry representatives warning that China may overwhelm India’s manufacturing sector through dumping of cheaper goods.
Trade ministers of the proposed trade grouping are currently meeting (2-3 August) in China to hammer out a consensus on the way forward and conclude the trade deal by the year-end.
However, commerce and industry minister Piyush Goyal, who conducted marathon meetings with industry groupings at New Delhi and Mumbai last month, has decided to skip the meeting “to attend the extended Parliament session”. Trade secretary Anup Wadhawan is representing India at the RCEP Ministerial.
“Tariff elimination to China under the RCEP deal could worsen India’s trade deficit with China, as well as with RCEP countries. India could also experience disproportionate loss of customs revenue,” a government official said, seeking anonymity.
India’s trade deficit with China and the RCEP grouping in 2018-19 stood at $53.6 billion and $105 billion, respectively.
Several industry representatives said the RCEP deal will first lead to an increase in imports before increasing exports. “This will drive MSMEs out of business and will not leave them in a position to take advantage of the RCEP opportunities,” the official added.
Representatives of iron and steel, dairy, textiles, marine products, electronics manufacturers, chemicals, pharmaceuticals and plastic industries were most vocal against the trade deal.
Amul, which contributes about 4% of India’s total dairy production, said all dairy products must be excluded from the trade deal, while the ministry of animal husbandry, dairying and fisheries has agreed to liberalize the sector to New Zealand, a major competitor of India in milk products.
Industry representatives also said India lost space to partner countries in several free trade agreements signed in the past decade, and domestic players had to make huge investments to stay competitive. “They believe signing of a new agreement like RCEP will further burden them,” the official said, adding: “They said compared to other countries, the number of cases where safeguard duties was imposed in India is low and the process is cumbersome.”