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Stumbling 'Bloc': Why India Is Yet to Join The Biggest Trading Group of Nations

By: Santosh Chaubey

Edited By: Pathikrit Sen Gupta

CNN-News18

Last Updated: November 17, 2022, 07:30 IST

New Delhi, India

The IPEF is slated to be the largest trading bloc globally once it comes into effect. Its 14 countries represent 40% of the global economy and 28% of the global goods and services trade. File pic/Reuters

The IPEF is slated to be the largest trading bloc globally once it comes into effect. Its 14 countries represent 40% of the global economy and 28% of the global goods and services trade. File pic/Reuters

With multipolarity and multilateralism being the core of India's foreign policy ahead, the emphasis on multilateral outfits like Quad or IPEF fits in the Indian narrative, yet the country chose to take a cautious approach here

Access to agricultural markets and concessions is one of the major reasons that stopped India from joining the ambitious Indo-Pacific Economic Framework for Prosperity (IPEF) trade pillar despite the fact that the country is pushing to develop a multipolar world. With multipolarity and multilateralism being the core of India’s foreign policy ahead, the emphasis on multilateral outfits like Quad or IPEF fits in the Indian narrative, yet the country chose to take a cautious approach here.

According to former diplomat Niraj Srivastava, agricultural concerns are possibly one of the major reasons that stopped India from joining the trade pillar of the IPEF framework. India has joined three other pillars of the initiative, i.e., supply chain pillar to build a resilient economy, clean economy pillar to push decarbonisation, and infrastructure and fair economy pillar to target anti-corruption and tax measures.

THE PROPOSED BIGGEST TRADING BLOC

The IPEF is slated to be the largest trading bloc globally once it comes into effect. Its 14 countries represent 40% of the global economy and 28% of the global goods and services trade. The US-led initiative has India, Australia, Brunei, Fiji, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam as its members. Except for India, all other countries have joined all four IPEF pillars.

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The initiative was launched in May 2022 in Tokyo on the sidelines of the Quad summit and its first ministerial meeting was held in the US in September 2022. India expressed some reservations about the IPEF trade pillar and conveyed that more negotiations were needed for a final and mutually beneficial draft document. A comprehensive discussion taking into consideration every country’s ground reality, social concerns, and internal policy requirements was the need of the hour. Piyush Goyal, India’s minister for commerce and trade, who participated in the meeting, said the proposed trade platform needed to get a consensus on various important aspects like environment, labour, digital trade, and public procurement before it comes into effect.

INDIA’S CONCERNS

The opinions of economists and policymakers are divided over the issues. Some support the decision, saying it is in the interest of the country like former diplomat Niraj Srivastava, while others say India is committing a mistake by staying away from such a big economic formation. India chose to walk out of the Regional Comprehensive Economic Partnership (RECP) because it was China-centric. The RCEP, with 15 members, is the largest free trade pact in the world so far. Its 15 members include 10 ASEAN nations and Australia, China, Japan, New Zealand, and South Korea. It came into force on January 1, 2022, and its member countries cover 30% of the world’s GDP. So data-wise and policy-wise, the IPEF is a much bigger platform for India to be in.

Most of India’s population depends on the agricultural sector for its survival. Agriculture contributes around 17% to India’s GDP but supports around 70% of the rural population directly and indirectly. Data from a consulting firm, the Centre for Monitoring Indian Economy (CMIE), says the agricultural sector in the country also employs 38% of its available workforce (2019-20 data).

But agriculture is a vulnerable sector that depends on the monsoon cycle and weather conditions. According to the Economic Survey of 2017, the sector sees losses to the tune of $9 to $10 billion annually due to extreme weather conditions. It directly affects the lives of the people associated with it and they look for government support. Farm subsidies like the minimum support prices, assistive trade policies, and food support are inseparable parts of government machinery, particularly in a country like India with the maximum number of poor people as per the World Bank standards. The US opposes most of these subsidies. Therefore, before agreeing to any international trade agreement, India needs to be fully sure that it is compliant with the internal stakes and domestic compulsions of the country.

Then there are other sensitive issues like digital economy, labour laws, trade practices and sovereignty issues, and environment protection that India is particularly concerned about, particularly after the language used by the US in the IPEF fact sheet, says Professor Dr Nagesh Kumar, director, Institute for Studies in Industrial Development (ISID). ISID is a Delhi-based autonomous institution run by the Government of India. It is dedicated to conducting policy research, advocacy, capacity-building, and outreach activities to foster the industrial transformation of India. The IPEF fact sheet discusses a level playing field, mostly from the Joe Biden government’s perspective, in implementing labour laws, making digital trade borderless, and putting up environmental protocols in business practices being followed.

India is a developing country of 136 crore people with 90% of its workforce in the unorganised sector and therefore the country cannot accept a trading platform with labour laws adopted internationally like in the US, Japan, or Australia. The country has put in place labour laws for its over 50-crore workforce in the organised and unorganised sectors, keeping in mind the social and economic structure of the nation ensuring them minimum wages and social security.

Reji K Joseph, associate professor at the ISID, says such issues were discussed in the WTO as well and opposed by India. He says human rights should be protected but India’s economic conditions are not suitable for making any commitments in an international trade agreement. He adds that if we sign an agreement where we say we will protect labour rights, then as a result of this, all our exports will be subject to scrutiny and it can become a major blow for our exporters. “We all like to see that our labourers get better working conditions but that cannot be done overnight.”

India is preparing to enact a digital protection law and is pushing for data sovereignty measures, i.e., most of the data flown over the internet to be stored in India with firms operating in the space following the local laws. Most of the big firms in this space are US-based firms and most of the data storage facilities are restricted to the US and Europe. The US is opposing this move by India and it has become a big point of contention between Indian and US policymakers.

Similar is the case with energy resources being used and the issue of environmental protection. India is a large and rapidly industrialising country. The years coming ahead are going to be even more important for it with the goal of the country to emerge as a developed nation by 2047 when it completes 100 years of Independence. More industries and rising income levels mean more dependence on and need for energy and much of it will still come from fossil fuels. The India Energy Outlook 2021 report from the International Energy Agency’s World Energy Outlook series says India will continue to rely on fossil fuels for some more decades ahead.

Joseph says pollution has its genesis in the historical economy and industrial activity of developed countries of Europe and America. They have made money and resources and generated advanced technologies that they are not willing to share. Now they talk of global action on climate. Though India’s new climate goals are ambitious, with net-zero emissions by 2070, the country has to go through these phases.

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first published:November 17, 2022, 07:30 IST
last updated:November 17, 2022, 07:30 IST