Arvind Panagariya, former vice chairman of the NITI Aayog, has said that the Asia-Pacific free trade agreement that India refused to sign earlier this month would have been in the country’s interest. Speaking to The Indian Express, Panagariya claimed no multinational company would want to enter India if 15 countries in the region sign the agreement but India does not.
The Regional Comprehensive Economic Partnership, or RCEP, is a free trade agreement among 16 countries across the Asia-Pacific region that aims to reduce tariffs and duties for member countries so that goods and services can flow freely. It will become the world’s largest trade bloc when created. However, on November 4, Prime Minister Narendra Modi confirmed that India will not participate in the trade bloc. India fears, among other things, a potential flood of Chinese imports after the barriers are demolished.
In an interview published on Wednesday, Panagariya downplayed this fear and said that such free trade agreements are not immediately implemented. “...You don’t immediately knock down tariffs,” he said. “You very gradually do it and a large part of the tariffs knock down towards the end of transition period. So, this whole thing about ‘we sign the deal today and the avalanche of imports of new products from China will begin’ is all wrong.”
“This is a great time for India to bring in large multinationals as investors to the country and if they have duty-free access to the large Asian markets it will be an added kind of incentive for them to locate themselves in India,” Panagariya told The Indian Express. “If RCEP is signed by other 15 countries and we are sitting outside, no multinational will want to come here.”
He said that India appeared to have stayed out as it was looking for a “better bargain” and “some of the concessions they were seeking were not offered”. “My own reading is that this is not the final word, more negotiations will happen,” he said.
Panagariya said that he thinks the agreement is in India’s interest and one “would imagine the prime minister recognises that”. He said the trade bloc would be a very large market with 3 billion people and 20% of the global Gross Domestic Product. “So, you can’t be outside of it because that would mean that anything we export to those markets will be subject to very high tariff whereas the other 15 who are members already, they will be exporting their products freely to each other’s markets,” he said. “That leaves our exporters at very big disadvantage.”
Panagariya further said: “Ultimately, Indian industry has to compete in global market. Otherwise, we are left isolated and Asia is a very large growing market…the centre of gravity of global economy…I hope the Prime Minister sees that.”