India stepping up efforts to reach a deal centered on China this year

Now, after 12 advanced economies accounting for 40 percent of the global economy signed a TPP deal, India’s trade negotiators feel they need to get a move on. India is stepping up efforts to reach agreement with an alternative trade bloc centered on China and hopes to reach a deal this year.

New Delhi has long been seen by many countries as an intransigent player at the World Trade Organization (WTO), a multilateral forum that has struggled to find the consensus it needs to move forward.

Prime Minister Narendra Modi has backed an export-focused ‘Make in India’ drive as the path to prosperity for Asia’s third-largest economy, where per capita output is $1,688 a year, one fifth that in China.

With TPP out of reach – India was not invited to join – India’s negotiators are focussing instead on a Chinese-led grouping called the Regional Comprehensive Economic Partnership (RCEP) that would improve its access to Asian markets.

Trade representatives meet in Brunei from Feb. 15-19 to iron out differences on tariffs. A senior New Delhi official said that India was hopeful of striking a tariff-cutting deal this year, in the clearest indication yet that India wants to accelerate progress on a bloc first launched in 2012.

Ganeshan Wignaraja of the Asian Development Bank said that a breakthrough on RCEP would help mitigate the competitive disadvantage of India being absent from the TPP.

Concluding an RCEP agreement would mark a key milestone for the Modi government. Experts caution that India has shown little appetite to open its market to imports, even as it seeks to ramp up exports, not least because of a gaping trade deficit with China.

Professor Bernard Hoekman, a trade expert at the Robert Schuman Centre for Advanced Studies in Italy said that India is worried about opening up to China and very much doubts an RCEP deal would happen this year.

With the TPP lacking votes in Congress and likely to be put on hold if a Republican is elected U.S. president, any sign China is seizing the initiative in the trade arena could raise concerns over Washington’s declining clout in Asia.

Beijing has already redrawn the financial map by launching the Asian Infrastructure Investment Bank, with backing from close U.S. allies like Britain. New Delhi fears the TPP, although years away from reality, could mean losing some textile and drugs exports to countries like Vietnam, which has embraced both the TPP and the RCEP.

Commerce Minister Nirmala Sitharaman said that it could also raise barriers to entry on labour, environment and intellectual property when it comes to seeking access to other markets. The TPP will certainly have an impact on India’s exports. It is most likely to affect sectors like textile, clothing, leather goods, plastics and chemicals.

Talks on creating the 16-member RCEP could be the last hope for some Indian companies to break into the global supply chain. The group comprises the 10 members of the Association of Southeast Asian Nations (ASEAN), China, Japan, South Korea, India, Australia and New Zealand. If signed, the regional free trade agreement would create an economic bloc with a population of 3.4 billion and trade volume of over $17 trillion.

According to Chandrajit Banerjee, director general of the CII, TPP will basically change the landscape of global trade. Successful export industries, particularly garment and drug makers, have been urging Modi to speed up RCEP talks and wrap up trade deals with the European Union and Australia.