Home Contact Us  

India & the World - Articles

Print Bookmark Email Facebook Subscribe
#5370, 28 September 2017

Regional Economy

India's Trade Options
Amita Batra
Professor of Economics, Centre for South Asian Studies, School of International Studies, JNU

The Indo-Pacific economic space continues to be open to reconfiguration, triggered as it has been by the US withdrawal from the Trans Pacific Partnership (TPP) earlier this year. There have since been many conjectures on how the region may see a China-led economic order, particularly so as the Japanese attempts for a TPP revival have not yielded any concrete positive outcomes so far. Alternatively, Japan-India relations, that have been in the forefront with Prime Minister Abe’s visit to India earlier this month, are being considered as a possible counter balancing force in the region. It is therefore relevant and worthwhile to examine the relative placement of China and Japan in India’s economic relations and discuss India’s options in the larger regional economic context.

First, while China is India’s top trading partner, Japan is not even among the top ten trading partners for India, and has not been so for almost a decade. In 2016-17, India’s trade with China was US$ 71 billion as against US$ 13 billion with Japan. Interestingly, while India incurs a trade deficit with both countries, it is the deficit with China that attracts attention, even though the deficit with both countries, as a share of total bilateral trade, is almost equal at 70 per cent. With Japan, India has a Comprehensive Economic Partnership Agreement (CEPA) that was signed in 2011. After six years of its implementation, growth in bilateral trade with Japan has been insignificant and in fact the rate of growth of exports registered a significant decline in 2016-17. In contrast, even without a preferential trading arrangement, India’s exports to China have seen a positive growth over the last year.

Importantly, in the pharmaceutical sector, Japan has been insistent on quality and regulatory standards, particularly in respect of pharmaceutical goods which is a major export category for India not just in bilateral but in global trade too. Although China also imposes trade barriers for Indian pharmaceutical exports, a significant difference is to be noted with regard to their membership of regional trade formulations – Japan is a member of both the Regional Comprehensive Economic Partnership (RCEP) and the now in-suspension TPP; China, like India, is a member only of the RCEP and not of the TPP. Japan has been very keen to revive the TPP with or without US membership.

A consequence of this differential membership is that Japan, in the spirit of TPP trade rules, seeks higher and World Trade Organisation (WTO)-plus standards in its bilateral trade transactions that would be very hard for India to comply with presently and in the near future. In fact, given that the RCEP is an ASEAN-centred pan-Asian trade arrangement with greater flexibility on trade-related issues, and that India has a differential trade liberalisation offer for its FTA and non-FTA trade partners (including China), it may be in India’s interest to work towards an accelerated finalisation of its negotiation process and to see it emerge as the predominant trade initiative in the region.

Second, growth in global trade for over a decade prior to the global financial crisis was led by trade concentration in regional production networks. Among these, China was the hub of the East Asian production networks, specialising in parts and components trade. In the last five years or so and significantly from 2011-2014, global trade has slowed down, and in 2015 global trade contracted by 10 per cent. For East Asia, the rate of decline in imports has been greater than that in exports. To a large extent this change in trade pattern reflects the consolidation and shortening of global value chains. For China and other regional economies the value chains are getting centred domestically As the East Asian regional integration process deepens, India has the opportunity to strengthen trade with China and ASEAN through the RCEP, and thereby realise its ‘Act East’ Policy. Increased trade liberalisation under the RCEP will allow for India’s integration in regional value chains. The process will involve production up-gradation, manufacturing sector growth, employment and skill enhancement – all the objectives already embodied in the ‘Make in India’ initiative.

Lastly, if the RCEP does not gain momentum it is possible that China may like to push for the Free Trade Area of the Asia Pacific (FTAAP), which draws its membership from the Asia Pacific Economic Cooperation (APEC). China proposed a roadmap towards FTAAP at the 2014 APEC summit meeting with the support and commitment of APEC members. India has not been successful, so far, in securing membership of the APEC. Strengthening India’s relations with Japan could help in this regard. However, irrespective of Japanese support, India will have to expedite implementation of the Trade Facilitation Agreement of the WTO, including the more difficult regulatory and institutional reforms, as the trade facilitation action plans of the APEC have been among its more successful programmes.

It may therefore be in India’s best interest to contribute to an early finalisation of the RCEP negotiations, consolidate its participation in the East Asian regional value chains as also further its export growth with China. The alternatives may be both long drawn out and harder to implement for India.

Print Bookmark Email Facebook Subscribe
IPCS Columnists
Af-Pak Diary
D Suba Chandran
Resetting Kabul-Islamabad Relations: Three Key Issues
Can Pakistan Reset its Relations with Afghanistan?
The New Afghanistan: Four Major Challenges for President Ghani
Big Picture
Prof Varun Sahni
Understanding Democracy and Diversity in J&K
When Xi Met Modi: Juxtaposing China and India
Pakistan?s Tactical Nuclear Weapons: The Inevitability of Instability

Dateline Colombo

Asanga Abeyagoonasekera.
Sri Lanka: Moving Towards a Higher Collective Outcome
The Importance of Electing the Best to our Nation's Parliament
Sri Lanka: Toward a Diaspora Re-Engagement Plan
Dateline Islamabad
Salma Malik
Pakistan's Hurt Locker: What Next?
IPCS Forecast: Pakistan in 2015
India-Pakistan Relations in 2015: Through a Looking Glass
Dhaka Discourse
Prof Delwar Hossain
IPCS Forecast: Bangladesh in 2015
18th SAARC Summit: A Perspective from Bangladesh
Bangladesh in Global Forums: Diplomacy vs. Domestic Politics
Eagle Eye
Prof Chintamani Mahapatra
India-US: Significance of the Second Modi-Obama Meet
Has President Obama Turned Lame Duck?
Modi-Obama Summit: Criticism for Criticism?s Sake?

East Asia Compass
Dr Sandip Mishra
India-Japan-US Trilateral: India?s Policy for the Indo-Pacific
China-South Korea Ties: Implications for the US Pivot to Asia
Many ?Pivots to Asia?: What Does It Mean For Regional Stability?
Himalayan Frontier
Pramod Jaiswal
Nepal?s New Constitution: Instrument towards Peace or Catalyst to Conflict?
IPCS Forecast: Nepal in 2015
Constitution-making: Will Nepal Miss its Second Deadline?

Prof Shankari Sundararaman
IPCS Forecast: Southeast Asia in 2015
Indonesia's Pacific Identity: What Jakarta Must Do in West Papua
Modi in Myanmar: From ?Look East? to ?Act East?
Sushant Sareen
IPCS Forecast: Pakistan in 2015
Islamic State: Prospects in Pakistan
Pakistan: The Futility of Internationalising Kashmir

Looking East
Wasbir Hussain
Myanmar in New Delhi's Naga Riddle
China: ?Peaceful? Display of Military Might
Naga Peace Accord: Need to Reserve Euphoria
Maritime Matters
Vijay Sakhuja
Indian Ocean: Modi on a Maritime Pilgrimage
Indian Ocean: Exploring Maritime Domain Awareness
IPCS Forecast: The Indian Ocean in 2015

Nuke Street
Amb Sheelkant Sharma
US-Russia and Global Nuclear Security: Under a Frosty Spell?
India's Nuclear Capable Cruise Missile: The Nirbhay Test
India-Australia Nuclear Agreement: Bespeaking of a New Age
Red Affairs
Bibhu Prasad
Countering Left Wing Extremism: Failures within Successes
Return of the Native: CPI-Maoist in Kerala
The Rising Civilian Costs of the State-Vs-Extremists Conflict

Regional Economy
Amita Batra
India and the APEC
IPCS Forecast: South Asian Regional Integration
South Asia: Rupee Regionalisation and Intra-regional Trade Enhancement
South Asian Dialectic
PR Chari
Resuming the Indo-Pak Dialogue: Evolving a New Focus
Defence Management in India: An Agenda for Parrikar
Pakistani Taliban and Al Qaeda in Afghanistan: Implications for Asian Security

Spotlight West Asia
Amb Ranjit Gupta
Prime Minister Modi Finally Begins His Interaction with West Asia*
A Potential Indian Role in West Asia?
US-GCC Summit: More Hype than Substance
Strategic Space
Manpreet Sethi
India-Russia Nuclear Vision Statement: See that it Delivers
Global Nuclear Disarmament: The Humanitarian Consequences Route
Nasr: Dangers of Pakistan's Short Range Ballistic Missile

The Strategist
Vice Admiral Vijay Shankar
Jihadi Aggression and Nuclear Deterrence
The Blight of Ambiguity
Falun Gong: The Fear Within

OTHER REGULAR contributors
Gurmeet Kanwal
Harun ur Rashid
N Manoharan
Wasbir Hussain
Rana Banerji
N Manoharan

Ruhee Neog
Teshu Singh
Aparupa Bhattacherjee
Roomana Hukil
Aparupa Bhattacherjee


Browse by Publications

Issue Briefs 
Special Reports 
Research Papers 
Seminar Reports 
Conference Reports 

Browse by Region/Countries

East Asia 
South Asia 
Southeast Asia 
US & South Asia 

Browse by Issues

India & the world  
Naxalite Violence 
Suicide Terrorism 
Peace & Conflict Database 
Article by same Author
19th Party Congress: Understanding the Economics in Xi’s Speech

Pakistan’s Economy: Significance of MSCI Elevation and FTSE Inclusion

Trump's Trade Scenarios: Implications for India

G20 Summit 2016: A Lost Opportunity?

GST: Facilitating India’s Domestic, Regional and Global Integration

Brexit Consequences: Complexities and Uncertainties

Changing Regional Contours and Imperatives for India

India and the APEC

IPCS Forecast: South Asian Regional Integration

South Asia: Rupee Regionalisation and Intra-regional Trade Enhancement

18th SAARC Summit: An Economic Agenda

Regional Economic Architecture: Is India Ready?

Y! MyWeb
Print Bookmark Email Facebook Subscribe
Year 2018
 January  February
 2017  2016  2015  2014  2013  2012  2011  2010
 2009  2008  2007  2006  2005  2004  2003  2002
 2001  2000  1999  1998  1997

The Institute of Peace and Conflict Studies (IPCS) is the premier South Asian think tank which conducts independent research on and provides an in depth analysis of conventional and non-conventional issues related to national and South Asian security including nuclear issues, disarmament, non-proliferation, weapons of mass destruction, the war on terrorism, counter terrorism , strategies security sector reforms, and armed conflict and peace processes in the region.

For those in South Asia and elsewhere, the IPCS website provides a comprehensive analysis of the happenings within India with a special focus on Jammu and Kashmir and Naxalite Violence. Our research promotes greater understanding of India's foreign policy especially India-China relations, India's relations with SAARC countries and South East Asia.

Through close interaction with leading strategic thinkers, former members of the Indian Administrative Service, the Foreign Service and the three wings of the Armed Forces - the Indian Army, Indian Navy, and Indian Air Force, - the academic community as well as the media, the IPCS has contributed considerably to the strategic discourse in India.

Subscribe to Newswire | Site Map
18, Link Road, Jungpura Extension, New Delhi 110014, INDIA.

Tel: 91-11-4100-1902    Email: officemail@ipcs.org

© Copyright 2018, Institute of Peace and Conflict Studies.