Context:
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With the conclusion of the India–New Zealand Free Trade Agreement (FTA) negotiations on December 22, India has effectively secured trade arrangements with 14 out of 15 RCEP member countries.
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Although India opted out of the Regional Comprehensive Economic Partnership (RCEP) in November 2019, it has gradually built an alternative framework through bilateral trade deals, excluding only China.
Key Highlights:
Agreement Insights / Trade Policy Approach
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India’s exit from RCEP was driven by fears of Chinese goods flooding Indian markets under a tariff-free multilateral system.
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Instead, India adopted a bilateral FTA strategy, ensuring access to Indo-Pacific markets while retaining control over tariff policy toward China.
Smart Risk Management
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China’s strong manufacturing competitiveness was seen as a systemic threat to Indian domestic industry.
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Staying out of RCEP reflected India’s focus on protecting vulnerable sectors such as:
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Dairy industry
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Small-scale manufacturing
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Sensitive agricultural products
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Rules of Origin and Trade Deflection Concerns
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Under RCEP, Chinese products could potentially enter India indirectly through ASEAN nations with minimal processing.
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Bilateral FTAs allow India to impose stricter Rules of Origin, preventing “trade deflection.”
India–China Trade Framework
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India’s trade engagement with China currently operates under the Asia Pacific Trade Agreement (APTA).
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APTA is not a full FTA; it provides tariff concessions only on a limited positive list of products, preserving India’s trade defenses.
Shift Toward Reciprocal Trade
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India’s strategy aligns with the principle of Reciprocal Trade, where:
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Market access is exchanged only for meaningful benefits to Indian exporters
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Safeguards remain against non-market economies
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Relevant Prelims Points:
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RCEP: Mega trade bloc of 10 ASEAN nations + Australia, China, Japan, South Korea, New Zealand.
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India withdrew from RCEP in 2019 due to concerns of trade imbalance and Chinese import surge.
Issue + Causes
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Risk of cheap Chinese imports harming domestic manufacturing.
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Difficulty in protecting sensitive sectors in a multilateral tariff-free regime.
Government Initiatives / Strategy
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Building bilateral FTAs with almost all RCEP members.
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Ensuring stronger Rules of Origin provisions.
Benefits
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Wider market access in Indo-Pacific.
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Better control over sensitive sectors.
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Reduced vulnerability to Chinese trade dominance.
Challenges
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Negotiating multiple bilateral agreements is time-consuming.
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Need to ensure Indian exporters gain real competitiveness.
Relevant Mains Points:
Conceptual Clarity
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Rules of Origin: Criteria to ensure only genuinely produced goods receive tariff benefits.
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APTA: Preferential pact with limited concessions, unlike full FTAs.
Strategic Significance
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India’s approach strengthens its Indo-Pacific economic engagement without compromising domestic industry.
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Reflects India’s evolving trade doctrine emphasizing:
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Selective liberalization
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Reciprocity
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Strategic autonomy
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Way Forward
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Strengthen domestic manufacturing under Make in India.
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Improve export competitiveness to maximize FTA benefits.
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Maintain safeguards against unfair trade practices.
UPSC Relevance (GS-wise):
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GS 2 (International Relations): India’s Indo-Pacific trade diplomacy, RCEP decision
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GS 3 (Economy): FTAs, trade policy, Rules of Origin
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Prelims: RCEP, APTA, reciprocal trade framework