In 2019, after much deliberation, the Indian government chose to opt out of the Regional Comprehensive Economic Partnership (RCEP). Thereafter, the country has been exploring new bilateral trade partnerships: Since then, it has signed two trade agreements with Australia and the UAE, and is hopeful of concluding negotiations on others, including with the UK, Canada and the EU. Considering that, it is unfortunate that the government has, for now, chosen to opt out of the trade pillar of the US led Indo-Pacific Economic Framework (IPEF). From the government’s point of view there remains ambiguity on the final contours of the agreement, and the benefits that will accrue to the member countries. While the government should certainly seek to protect the country’s interest, and negotiate the best terms possible, it would perhaps have been more prudent to engage with the process.
The decision to opt out of the trade pillar comes at a time when the global economic environment has turned sour. In its recent update of the world economic outlook, the International Monetary Fund has lowered its forecast for global growth this year from 3.6 per cent to 3.2 per cent. Alongside, it has also brought down its forecast for world trade in goods and services to 4.1 per cent, as demand, especially in advanced economies, weakens with central banks tightening policy to tackle surging inflation. This slowdown in trade has already become visible in India’s trade statistics. After growing at 22 per cent in the first quarter of this year, export growth slowed down to 2.1 per cent in July, contracting by 1.2 per cent in August. This comes after the country’s exports witnessed staggering growth in 2021-22. Thus, considering that exports can provide the much needed fillip to growth, India must actively seek to be part of global value chains. It must shun protectionism, and venture into trade agreements, not only bilateral ones but also plurilateral pacts.
