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India’s RCEP dilemma sharpens as global trade shifts and US–China rivalry deepens, compelling New Delhi to weigh market gains against strategic risks
15 Asia-Pacific countries (comprising the Association of Southeast Asian Nations or ASEAN, China, Japan, South Korea, Australia, and New Zealand) signed the Regional Comprehensive Economic Partnership (RCEP) in November 2020, which is the world’s largest Free Trade Agreement (FTA). Together, these countries account for about 30 percent of global Gross Domestic Product (GDP) and population. India, though an active participant in the negotiations initially, pulled out of the Agreement at the last moment in 2019, citing concerns about safeguarding its domestic economy and the probability of imbalance in benefits. Since then, debates have continued within India’s strategic and economic community on whether the country should reconsider its decision. With the intensifying geopolitical rivalry between the United States (US) and China, and the recent tariff measures imposed by the US, the question of India’s membership in RCEP has once again regained salience. This article examines the merits and concerns of India joining RCEP.
Participation in RCEP may offer a significant economic and strategic advantage to India, and it can gain access to large integrated markets throughout the RCEP member countries. This joining would provide Indian companies greater access to big customer bases, and they may gain from reduced tariffs and prospects of an increased export due to the size of the trading bloc. India might earn up to US$60 billion by 2030 if it joins the RCEP, according to several studies. Furthermore, India's participation in RCEP would demonstrate its commitment to regional economic integration in a globalised world where trade is frequently viewed as a growth engine.
India might earn up to US$60 billion by 2030 if it joins the RCEP, according to several studies.
Similarly, India may benefit from technical cooperation with highly developed nations such as South Korea, Japan, New Zealand, and Australia to create better and more competitive products. As a result of regional competition, the telecommunications and agricultural sectors are expected to grow. Additionally, there is a huge network of supply chains between the RCEP members, and a deeper integration into these regional supply chains could strengthen India’s manufacturing base and attract investment from companies pursuing a “China Plus One” strategy.
Agenda of India's internal reform programme initiatives such as Atmanirbhar Bharat, or an independent India, is to increase Indian manufacturing in industries like electronics and solar cells. In the event that these reforms prove effective and a manufacturing driven high growth trajectory is achieved, India may feel more certain about its capacity to compete on the world market and RCEP may prove to be an apt platform for this. Participation in RCEP could also generate significant benefits for India’s Micro, Small and Medium Enterprises (MSMEs) sector, which forms the backbone of India’s manufacturing and employment base. Access to a wider regional market, along with harmonised standards and supply-chain linkages, could enable MSMEs to scale up the operations, integrate into regional production networks, and adopt advanced technologies through partnerships with firms from RCEP member countries.
Despite these merits, India has valid reasons for continuing its disassociation. One of the most pressing concerns for India is related to increased market access for China, Australia, and New Zealand, which could lead to a potential surge of low-cost imports from Chinese manufacturers and dairy products from New Zealand and Australia in the Indian market, dislodging local producers and small-scale businesses.
India’s trade deficit with RCEP members has grown significantly following existing FTAs. For instance, deficits with ASEAN, South Korea, and Japan have soared by 302 percent, 164 percent, and 138 percent, respectively, which is beyond the global average of 81 percent increase in the global deficit. Signing RCEP may widen India’s trade deficit, as well. However, trade deficits are not inherently detrimental if accompanied by safeguards and policies that improve the economic impact of MSMEs. China’s secretive trade policies might also be a worrying point for India, as policymakers feel that China is not very transparent in its economic practices.
These issues weaken India’s ability to protect its domestic interests, affect it adversely, and remain central to India’s current position.
Further, if India decides to join RCEP, the ongoing initiatives of India, such as Make in India and Vocal for Local, which primarily aim to strengthen the country’s domestic capacity and resilience so that India can engage with the global economy from a position of greater strength, could undermine India’s goal of building a competitive and self-reliant economy. India’s decision to withdraw from RCEP in 2019 was based on a set of concerns formally articulated by the Government of India, which included demands like amendments in tariff differentials, alterations in the base rate of customs duty, modifications to the most favoured nation (MFN) rule, incorporation of certain exemptions into ratchet obligations within the agreement, and the recognition of India’s federal character in investment determinations. These issues weaken India’s ability to protect its domestic interests, affect it adversely, and remain central to India’s current position.
India’s Ministry of Commerce & Industry made it clear in December 2024 that India is not reconsidering its stand on joining RCEP, stating that the country’s position remains unchanged and the outstanding issues and concerns remain unresolved. On the other hand, during November 2024, NITI Aayog suggested that India should consider joining RCEP to boost its manufacturing units and enhance exports, which would support the nation in seizing the global China plus One opportunities. Nevertheless, the suggestions regarding reconsideration are more of policy discussions rather than any shift on the part of the Government.
India’s Ministry of Commerce & Industry made it clear in December 2024 that India is not reconsidering its stand on joining RCEP, stating that the country’s position remains unchanged and the outstanding issues and concerns remain unresolved.
India’s RCEP dilemma reflects a broader challenge of balancing global integration with domestic resilience. Remaining outside RCEP allows India to protect its sensitive sectors such as agriculture, dairy, and many MSMEs. However, it also limits India’s access to regional value chains and can reduce its influence in shaping Indo-Pacific trade architecture. The trajectory of global geopolitics, especially the US-China rivalry, along with ongoing reforms to strengthen MSME competitiveness, will play a significant role in India’s eventual participation in the RCEP. Until then, India’s calibrated approach of pursuing selective FTAs while observing RCEP from the sidelines remains a pragmatic middle path.
Jyoti Singh is a Delhi-based advocate and researcher. She has worked as a legal consultant to the Government of India and has been actively involved in several investment treaty negotiations.
(This article reflects an independent analysis of India’s trade considerations based solely on publicly available information. It does not represent the official position of the Government of India.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
Jyoti Singh is a Delhi-based advocate and researcher. She has worked as a legal consultant to the Government of India and has been actively involved ...
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