May the twain meet: Look East as much as West for Indian exports
trade deal, namely the Regional Comprehensive Economic Partnership (RCEP), considered the world’s largest free trade bloc, covering around 30% of the world’s population, gross domestic product (GDP) and trade. The RCEP came into full force on 2 June.
With the Philippines being the last one to complete its ratification process, this trade arrangement is now effective for all its 15 members—the 10 ASEAN countries along with China, Japan, South Korea, Australia and New Zealand. India is also not a part of the Comprehensive and Progressive agreement for Trans-Pacific Partnership (CPTPP) and the trade pillar of the Indo-Pacific Economic Framework for Prosperity (IPEF), which are the two other large trade deals in the broader Asian region.
As tariffs among member countries of those pacts continue to fall and trade and investment synergies improve, it is possible that India’s export potential to the APAC region will face further headwinds. That said, India has 13 free trade agreements (FTAs) and six preferential trade agreements (PTAs) with various countries/regions, and these mitigate some of the risks that arise from not joining mega regional trade deals.
To sum up, therefore, while India tries to increase exports to Western advanced economies, it would be pragmatic for the country not to lose focus on the APAC region. In terms of size alone, at around $32 trillion (nominal GDP size in 2022), the APAC (ex-India) market is bigger than both the US ($25.5 trillion) and Eurozone ($14.1 trillion).
Indeed, S&P Global expects APAC (ex-India) growth at around 4% to exceed that of the US (1.7%) and the Eurozone (0.6%) this year, and this trend is likely to continue in the foreseeable future. Hence, India must think of ways to harness
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