Mahmood Hassan

Now with India’s refusal to join the RCEP, there will be a huge setback in the flow of investment to the Northeast region. Even the tourism sector will be severely affected. The Asian Trilateral Highway connecting India with the ASEAN nations is already under construction for the free flow of goods. Yet we do not have any trade agreement with the neighbours.

The External Minister of India, Dr S Jaishankar, was on an official visit to Assam recently. While addressing a function on the subject of ‘Act East Policy and India-Japan Cooperation in Northeast India with special focus on Assam’ at the Srimanta Sankaradeva Kalakshetra, he  stressed the need to make Assam the springboard of India’s Act East Policy to connect with countries lying east of Asia due to their natural proximity. Further, he opined that in this geographically landlocked area, there should be free flow of ideas and goods not only to the East Asian countries but also to South Korea and Japan as well.

Unfortunately, despite passing of decades, no concrete roadmap has been formulated by the Centre for putting the policy into practice. No active role of the External Affairs Ministry and the Directorate of Foreign Trade of Government of India could be seen to promote trade and commerce between the neighbouring nations of the region till date. This neglect is now compounded by the formation of the Regional Comprehensive Economic Partnership (RCEP) among the Asian nations.

In contravention to the basic objectives of the Act East Policy, India has decided not to join the RCEP that includes almost all the ASEAN countries that have signed a Free Trade Agreement (FTA) for promotion of trade and commerce among themselves as well as the Asia-Pacific nations including Australia, New Zealand, Japan and South Korea. This newly-formed trading block is now considered to be the world’s largest economic cooperation covering 30% of global trade. Even though the forum was at first proposed in 2012, they decided to join the bloc through virtual conference with the objective to put their respective pandemic hit economies back on track. The leaders felt that in the present situation, multilateralism is the right way to revive the global economy. The agreement will lower tariffs and open up the markets for products and services within the bloc. Little did India realize that such a move could potentially leave India with less scope to tap the large market that the RCEP nations present.

The big question is why did India opt out of RCEP? There is a growing fear that signing the FTA would allow cheaper Chinese products to ‘flood’ the Indian markets through RCEP nations that would in turn destroy the existing small industries in India. India has a huge trade deficit with China and the ASEAN nations for which she is unable to leverage its existing bilateral free trade agreements with several RCEP members to increase its exports.

The isolationist stand of India has created a dilemma for the landlocked Northeast to promote trade with the neighbours through the Act East policy. In order to attract investment from all across the neighbouring nations and rest of India, Assam organized the ‘Advantage Assam’ event with much fanfare. Now with India’s refusal to join the RCEP, there will be a huge setback in the flow of investment to the Northeast region. Even the tourism sector will be severely affected. The Asian Trilateral Highway connecting India with the ASEAN nations is already under construction for the free flow of goods. Yet we do not have any trade agreement with the neighbours. Many economists are sceptical of the decision of India to stay in isolation from the global economy.

India that became a liberal economy in the 1990s has now fallen behind of even the smaller nations of Asia in recent times due to its failure to promote the export potential of the country. India was a global leader in export of textiles, automobiles, two-wheelers, software products, pharmaceutical items, etc. Today the GDP of Bangladesh is better than India. Bangladesh has proved its prowess by becoming the world’s second largest textile industry after China and manufacturing all the international brands outsourced by the multinational companies. Following protectionist policies in days of global liberalization in the name of Atmanirbhar Bharat will not help the economy in the long run.

Moreover, the Indian economy is presently undergoing a deep crisis as the GDP has gone down to 5%. It does not have the capacity to compete even with the neighbours both in agriculture or industry. The unemployment situation is the worst in 45 years. The vision for a trillion-dollar economy now looks like a distant dream.

Lately, the smaller Asian nations have seen faster economic growth following aggressive liberal trade policies. Countries like Vietnam, Brunei, Indonesia, Singapore or Thailand have done well despite economic dominance by neighbouring China that is on an aggressive infrastructure building spree all across Asia and Europe to promote the Belt and Road Initiative (BRI). Kishore Mehbubani, former Foreign Secretary of Singapore who authored several books on the Asian economic miracle including Has China Won?, stated that India is missing out an enormous opportunity by not joining the RCEP and should learn from these smaller Asian nations. He is of the opinion that those Asian countries that have signed the FTA have done well for following liberal economy. Former diplomat Shyam Sharan also sees it as India’s short-sighted move. He states that most of the global trade now is organized through large trading arrangements. Anita Inder Singh, founding professor of the Centre for Peace and Conflict Resolution, New Delhi says that India’s absence from the economic group may lead to ‘isolation’, while economist Gurcharan Das sees the step as a ‘fiasco’ and is of the opinion that India should carry out bold reforms to face competition from the ASEAN nations. He feels that if the smaller countries of the neighbourhood could do well, why not India? The notion of ‘Make in India’ should be replaced by ‘Make for the world’ like China.

Many of the policymakers argue that closing the doors of the economy will harm rather than improving the position of the economy. India has the ability to export software, automobiles, two-wheelers, consumer durables, pharmaceutical items and vaccines at competitive prices. In order to become a manufacturing power, India has to come out of its protectionist mindset. Lack of a vision to promote the Act East Policy into practice has devoid us from trading with the neighbours. Import of betel nuts from Myanmar for the pan masala industry is negatively reported in electronic media as smuggled goods. Granting export-import licence to the unemployed youths can at least solve the unemployment problem to a certain extent. Moreover, Assam does not have any decision-making role in implementation of the Act East policy as the role is confined to the External Affairs Ministry and Directorate General of Foreign Trade that has to play a proactive role in this regard.