Amlan Ray, M. G. Deepika and G. Badri Narayanan
In the context of policy developments surrounding India’s opting out of Regional Comprehensive Economic Partnership (RCEP) and India’s lack of ventures in plurilateral regional trade agreements (RTAs), with the latest trade statistics available with the World Integrated Trade Solution (WITS Database, 2020), the study analyses India’s competitive position within RCEP for the given set of commodity groups by looking into few indicators of competitiveness like Revealed Comparative Advantage (RCA) and export intensity index (EII) and the existing tariff rates among the RCEP members.
RCEP region comprises one-fifth of India’s total exports and one-third of Indian imports. For instance, India’s exports share to China constitutes around 4.39% of its total exports, the import share is substantially large at 15.34% of the total imports. This indicates a net inflow of a substantial amount of goods in India from RCEP negotiating countries. As per the analysis, India runs a trade deficit with 11 out of 15 RCEP countries. India’s strong presence in services is revealed with 3.35% of the share in world exports of services. India is also one of the leading countries in services exports among the RCEP group revealing its advantage in global markets in this sector. However, one cannot ignore the growing competition in the area of services from other RCEP countries. India is at the seventh position in total services exports in the world behind the USA, UK, Germany, France, China and Japan. Considering the size of the Indian economy, its share in world exports is quite low. India’s export share is in the top three among RCEP countries.
The EII reveals a low export intensity of India in major RCEP markets including China, Japan, Cambodia, Korea, New Zealand and the Philippines, even with Japan and Korea in spite of having an economic co-operation agreement with both for more than a decade. Whereas India has a high EII with Australia, Brunei, Indonesia, Myanmar, Malaysia, Singapore, Thailand and Vietnam. Even countries with high consumptions India’s EII is low. On the contrary, China and Korea export intensity to India is high. EII of India is not strong enough at this moment to indicate any high potential of Indian exports within RCEP.
India’s RCA is more than one in case of consumer goods, intermediates, animals, chemicals, footwear, hides and skin, metal, minerals, stones and glass, textiles & clothing and vegetables. Even so, there is immense competition among RCEP countries. We see high RCA (more than1) of India in 11 commodities out of 20 groups and high EII only with eight countries within RCEP. EII figures indicate that India is lagging behind other countries in intra RCEP exports, RCA also does not show any distinct commodity-wise edge for India.
Being a member of RCEP can bring some nominal advantage in exports to India but there is a threat of imports and deficit trade in both consumer goods and textile & clothing. In the case of hide & skin, vegetables and minerals we cannot comment with certainty about India’s potential gain or loss. Figures on exports of RCEP members show that it was quite difficult for India to open 80% of its market for RCEP countries.
It would be appropriate for India to stay away from RCEP until it proves its trade competitiveness in select commodities and services and focuses on more effective bilateral trade pacts correcting the weak areas of FTAs with the partner countries.