The Regional Comprehensive Economic Partnership, or RCEP, isn’t what it appears to be. If India signs up for it, as the government has indicated it is planning to do, the potential fallout for this country’s 1.3 billion people may be difficult to calculate at this point. Why? Because there are several nations in the vicinity, which are commercially competent and industrious, even if not necessarily bigger than India. A close scrutiny of economic and commercial data can indicate the future scenario and possible harmful effects on India. It’s time to peruse the figures of the last 20 years. Let the facts speak.
India’s foreign trade contains three broad sectors. First, the (total) annual surplus (if any), and deficit. Second, the Sino-Indian bilateral. Third, the bilateral trade figures with 14 of the 16 proposed RCEP countries (China and India being 15th and 16th of the group). Unfortunately, and regrettably, India, in all three sectors, so far, has performed well below par, with chronic deficit. That is a cause for worry, because if India falls into an uncontrollable tailspin even once, it may become impossible for any course correction. Hence, it must be reminded that India’s demography alone equals the entire African continent’s 54 nations. Similarly, Europe’s demography of 51 countries is 60 per cent of India’s population. The Americas (North and South), of 51 nations, are less than 80 crore people. The 30-plus nations of Australasia are three crore people, to India’s 130 crore. India, therefore, cannot be compared with any country, except itself. Therefore, India-related issues have to be analysed and resolved
by Indians, and not by any international body or a RCEP-type trade conglomeration.
Hence, long-term policy planning and implementation is required to take India forward, as long years of deficit loom. The records of the past two decades are too dismal to be ignored, and too grave not to be addressed. Thus, whereas India’s total trade deficit stood at $12,915.48 billion (included in which was minus $743 million with China) in 1999-2000, the same deficit zoomed to $184,000.33 billion (China, minus $57,567.44 billion).
Incidentally, India’s latest defence budget, according to the International Institute for Strategic Studies, London, stands at $58 billion. In other words, only one year’s trade deficit (2018-19) can finance India’s defence budget for three years!
What, however, became more than serious was the total trade deficit of 2012-13 which hit a record $190,336.07 billion (with China, minus $38,713.45 billion). It’s a real tragedy because the collective wisdom of India’s rulers, irrespective of political affiliations, till now have failed to address the two decades of ballooning trade deficit in all sectors, thereby inflicting irreparable damage to New Delhi’s development plans and national economics.
The most amazing thing, however, is that despite the chronically “minus-deficit” trade figures, India has continued to progress! How? There must be some divine intervention from somewhere in the Indian economy, for its hard to explain this through logic. In fact, India’s cumulative loss of billions of dollars in global trade is one of the main reasons for its macroeconomic deficiencies, leading to an eternal gap between revenue and expenditure and the pressure on the State to sell its stake in public sector undertakings, its core assets, unlike China.
In reality, India’s foreign trade deficit woes continue unabated even today, thus leading to the desperation for quick remedial measures. Unfortunately, however, once international commerce and the interlinked national economy of a country like India derails, leading to recurring financial losses, it will be an agonisingly long haul for the administrators to put the house in order. The downhill economics for a country of 1.3 billion people cannot go for quick-fix remedies. India has to remain rock steady for the steep climb. Hasty steps may only inflict more damage than can be visualised at this stage.
Things have remained bad for the past five years. In 2014-2015, India’s trade stood at minus $137,694.93 billion (China, minus $48,478.92 billion); in 2015-2016 minus $118,716.67 billion (China, minus $52,696.59 billion); in 2016-2017 minus $108,504.60 billion (China, minus $51,111.14 billion); in 2017-2018 minus $162,054.83 billion (China, minus $57,868.90 billion) and in 2018-2019 minus $184,000.33 billion (China, minus $53,567.44 billion).
World trade and China aside, the situation doesn’t get any better for India even with the Asean countries, which constitute the 10 core countries of the proposed 16-nation RCEP. With a trade deficit of $9,610.77 billion (Australia); $534.91 million (Brunei); $10,574.07 billion (Indonesia); $7,910.94 billion (Japan); $4,372.30 billion (Malaysia); $12,053.90 billion (South Korea); $250.91 million (New Zealand); $3,000.41 billion (Thailand); $4,709.37 billion (Singapore) and $684.85 million (Vietnam), where does India go? How will India gain from a multilateral forum which already has pushed it into a corner? Will they allow India to move forward? That looks impossible. Hence, it’s got to be bilateral deals, rather than multilateral. “You give me this, and I will give you that”. Bilateral deals result from a dialogue, while a multilateral trade forum means the “survival of the fittest” and the “thriving of the biggest”.
Today is India’s day of reckoning. New Delhi’s national self-interest reigns supreme in front of the industrially advanced and financially robust China, Japan, South Korea and the likes of Australia, Brunei, Indonesia, Malaysia, New Zealand, Singapore and Thailand, who inflict a consistent and ceaseless high trade deficit on India.
In the end, India needs to learn a lesson or two; partly from China and partly from the United States. “China’s path to success was dictated by the State,” a US scholar wrote, adding: “It was export-driven economic nationalism”. Earlier, by 1984, the Beijing government had “lost control over imports”, that led to a massive trade balance deficit. China severely curbed all non-essential imports and promoted the export of manufactured goods. Unfortunately, that is an option India doesn’t have any longer, and the only thing it can do is to drastically cut imports. China turned around, from a chronic trade deficit and a “loss of self-reliance”, to a trade surplus.
The United States too, in its early days as a new nation, had started with “national self-interest”, as propounded by its first treasury secretary, Alexander Hamilton. He defended the protection of US manufacturing on the ground of national security, saying: “I too am a friend of free trade, but it must be free trade of perfect reciprocity”. Without total reciprocity, India today should not get into a club that will not serve its national interest. India’s own trade, business and industry needs to come first, foremost and last.