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Indian Prime Minister Narendra Modi’s administration won’t let China flood India with its manufacturing products, the way it did with Pakistan.
This week, Modi declined to sign the Regional Comprehensive Economic Partnership (RCEP) at the Association of Southeast Asian Nations (ASEAN) summit in Bangkok.
China is the biggest member of RCEP, and its manufacturing products could flood India’s markets, once the agreement takes effect; and widen further widening the trade deficit between India and China.
That’s what happened in Pakistan following the signing of a free trade agreement (FTA) with China back in 2006. According to Pakistan Bureau of Statistics (PBS) statistics, Pakistan’s imports from China soared from $3.52billion in 2006-7 to $15.74 billion in 2017-18.
Meanwhile, China’s share in Pakistan’s total world imports rose from 11.52% in the beginning of the period to 25.89% at the end of the period.
We all know what these soaring imports did to Pakistan’s economy. They pushed it to the doorstep of the International Monetary Fund (IMF) for another bailout.
Today In: Money
Obviously, India is trying to avoid Pakistan’s mistake. That’s why it’s reversing its 2012 decision to join RCEP.
“When India decided to be a part of the negotiations to become a member of the Regional Comprehensive Economic Partnership (RCEP) in 2012, the government in power in New Delhi was led by the United Progressive Alliance (UPA) under former Prime Minister Manmohan Singh from the Congress Party,” says Dr. Namrata Goswami, Senior Analyst and author.
But the political situation is different now, with India being led by the BJP dominated National Democratic Alliance (NDA), says Goswami. “While entrenched bureaucrats in the Ministry of External Affairs (MEA) may have wanted a trade pact this November, the BJP led Indian government has always been wary of the RCEP since its inception,” she noted.
One of these worries is that China imports could help destroy India’s manufacturing. “The Modi government views economic pacts like the RCEP, as offering China an ability to slowly integrate itself into the Indian economy, and replace Indian manufacturing with Chinese manufacturing, by extension, strategic influence,” she says.
koyfin_20191108_071800628
KOYFIN
And that could make things worse for India’s trade deficit with China. “India’s trade deficit and GDP difference with China has played a role,” adds Goswami. “China’s economy is $14 trillion (GDP nominal 2019), whereas India is $2 trillion (GDP nominal 2019). The trade deficit between China and India in 2018 was $53 billion. Unless a more favorable bilateral deal is signed by India with China to take in more Indian exports, signing onto the RCEP makes little sense.”
That’s why she thinks India should wait for a better time to sign RCEP. “There are predictions that India will become the economic peer of China by 2050,” she says. “That means that India’s economic position will only improve between now (2019) and 2050. By extension, India can negotiate bilateral agreements with ASEAN member states, Australia, New Zealand, Japan, etc., and does not want to tie itself into a RCEP framework when China dominates it now.”
That’s a big bet on the future, but it’s worth waiting rather than rushing and repeating Pakistan’s mistake.
https://www.forbes.com/sites/panosm...-turn-india-to-another-pakistan/#4bdc93996ebf
This week, Modi declined to sign the Regional Comprehensive Economic Partnership (RCEP) at the Association of Southeast Asian Nations (ASEAN) summit in Bangkok.
China is the biggest member of RCEP, and its manufacturing products could flood India’s markets, once the agreement takes effect; and widen further widening the trade deficit between India and China.
That’s what happened in Pakistan following the signing of a free trade agreement (FTA) with China back in 2006. According to Pakistan Bureau of Statistics (PBS) statistics, Pakistan’s imports from China soared from $3.52billion in 2006-7 to $15.74 billion in 2017-18.
Meanwhile, China’s share in Pakistan’s total world imports rose from 11.52% in the beginning of the period to 25.89% at the end of the period.
We all know what these soaring imports did to Pakistan’s economy. They pushed it to the doorstep of the International Monetary Fund (IMF) for another bailout.
Today In: Money
Obviously, India is trying to avoid Pakistan’s mistake. That’s why it’s reversing its 2012 decision to join RCEP.
“When India decided to be a part of the negotiations to become a member of the Regional Comprehensive Economic Partnership (RCEP) in 2012, the government in power in New Delhi was led by the United Progressive Alliance (UPA) under former Prime Minister Manmohan Singh from the Congress Party,” says Dr. Namrata Goswami, Senior Analyst and author.
But the political situation is different now, with India being led by the BJP dominated National Democratic Alliance (NDA), says Goswami. “While entrenched bureaucrats in the Ministry of External Affairs (MEA) may have wanted a trade pact this November, the BJP led Indian government has always been wary of the RCEP since its inception,” she noted.
One of these worries is that China imports could help destroy India’s manufacturing. “The Modi government views economic pacts like the RCEP, as offering China an ability to slowly integrate itself into the Indian economy, and replace Indian manufacturing with Chinese manufacturing, by extension, strategic influence,” she says.
koyfin_20191108_071800628
KOYFIN
And that could make things worse for India’s trade deficit with China. “India’s trade deficit and GDP difference with China has played a role,” adds Goswami. “China’s economy is $14 trillion (GDP nominal 2019), whereas India is $2 trillion (GDP nominal 2019). The trade deficit between China and India in 2018 was $53 billion. Unless a more favorable bilateral deal is signed by India with China to take in more Indian exports, signing onto the RCEP makes little sense.”
That’s why she thinks India should wait for a better time to sign RCEP. “There are predictions that India will become the economic peer of China by 2050,” she says. “That means that India’s economic position will only improve between now (2019) and 2050. By extension, India can negotiate bilateral agreements with ASEAN member states, Australia, New Zealand, Japan, etc., and does not want to tie itself into a RCEP framework when China dominates it now.”
That’s a big bet on the future, but it’s worth waiting rather than rushing and repeating Pakistan’s mistake.
https://www.forbes.com/sites/panosm...-turn-india-to-another-pakistan/#4bdc93996ebf
