5 Apprehensions of India Regarding RCEP

1. Trade deficit: India’s trade deficits have always widened with nations after signing free-trade-agreements (FTAs) with them. India’s merchandise trade deficit with the RCEP grouping hit $105 billion in FY19 (60% of its total deficit).
2. Threat to domestic market: RCEP members, particularly China, are demanding zero tariffs over 90 per cent tariff lines which is a major concern for India as low cost Chinese manufacturing goods will swamp its domestic market by dumping cheaper goods. A large number of Indian industry including iron and steel, dairy, marine products, electronic products, chemicals and pharmaceuticals and textiles have expressed concerns that proposed tariff elimination under RCEP would render them uncompetitive
3. Low labour productivity: Despite low relative labour cost, labour productivity in India in manufacturing is still one of the lowest in the world, and spatially fragmented labour laws escalate costs of transaction. Under such circumstances, the Indian industry is hardly in a position to compete in a level playing ground in a freetrade region.
4. Strict IPR policy: The “stringent IP provisions” have been stumbling blocks for a while, with India arguing for these to be taken out of the agreement. The provisions, if adopted, would lead to domestic pharma companies not being able to launch or export affordable life-saving drugs across the world. While in the agriculture sector, farmers would lose the right to save or sell seeds or the harvested produce from plant varieties that have been granted intellectual property.
5. Competition from China: It is evident that the size and scale of Chinese manufacturing industry backed with extensive financial and non-financial support provide a clear edge to Chinese manufacturing producers.