The Impact of RCEP on India: A Comprehensive Guide

1. What is RCEP?

The Regional Comprehensive Economic Partnership (RCEP) is a major trade agreement among 15 Asia-Pacific countries, including China, Japan, South Korea, Australia, and the ASEAN nations. It aims to reduce tariffs (import taxes) and make trade smoother among its members.

India was part of the initial negotiations but withdrew in 2019 due to concerns that cheaper imports from China and other nations could flood Indian markets, affecting local industries and farmers.

2. Why is this important for India?

RCEP holds great significance for India, especially as global trade dynamics evolve. Some key factors include:

• Tariff hit from the US: India’s exports to the United States have faced higher tariffs due to strained trade relations.
• Need for alternatives: If exports to Western markets slow down, RCEP countries collectively represent a vast and growing market for Indian goods.

3. India’s Export Pattern

Over the last decade, India’s exports have leaned more toward the US and Europe than toward Asia. Key observations include:

• Exports to RCEP nations such as Japan, South Korea, and ASEAN members have grown more slowly.
• In 2025, India’s share of exports to the US was around 19.8%, slightly higher than its combined exports to RCEP countries.

4. Where Can India Benefit?

If India reconsiders engaging with RCEP, it could gain in several high-demand sectors across Asia, including:

• Electronic goods
• Drugs & pharmaceuticals
• Readymade garments
• Gems & jewellery
• Engineering goods
• Agricultural & allied products

These sectors already have strong potential in Asian markets and could expand further with lower tariffs and better trade access.

5. Why Did India Walk Away Earlier?

India’s decision to withdraw from RCEP in 2019 was influenced by several concerns:

• Fear of cheap imports: Particularly from China, which could undermine domestic manufacturers.
• Agriculture concerns: Indian farmers feared losing to heavily subsidized foreign produce.
• Trade deficit worries: India already imports more from RCEP countries than it exports, and joining the bloc risked widening that gap further.

6. Current Situation – Is India Rethinking?

With increasing tariff pressure from the US, India is exploring whether engagement with RCEP members could serve as a trade safety net. However, several challenges remain:

• Farmers, small industries, and political groups still oppose RCEP membership.
• Global supply chains are shifting, opening new opportunities in Asia for India.
• Strategic participation with proper safeguards could help India expand exports while protecting domestic sectors.

SYNOPSIS

RCEP is the world’s largest trade bloc, but India opted out over fears of cheap imports and a widening trade deficit. As India now faces tariff challenges in Western markets, re-engagement with RCEP could help diversify exports in sectors like pharmaceuticals, textiles, electronics, and agriculture. The challenge lies in balancing open markets with domestic protection.

QUOTATION

“Nations that adapt to changing trade winds prosper, while those that resist remain anchored in old harbors.”