Why Did The Govt Backtrack On RCEP: Economic Interests Or Vote Bank Politics?

Recently, the Narendra Modi led Government of India, refused to sign the Regional Comprehensive Economic Co-operation Agreement with the Association of South East Nations (ASEAN) and five other countries, namely Australia, China, Japan, South Korea, New Zealand.

Shri Amit Shah, our Home Minister, in his statement, lauded the decision of the Government, and particularly Narendra Modi, saying that “his decision also cements India’s growing stature as a country that is rock solid in its resolve, to not only protect its own interests but also to boldly ward off any attempts to being arm-twisted”.

It is, therefore, apt, to unfold the reasons behind this backtracking by the Indian Government in signing the RCEP deal. After analysing the whole issue, it seems that the decision of the government is more political in nature than the ostensible reason of protecting the economic interests of the country.

While explaining the reason for backtrack, Narendra Modiji said: “Whenever I try and gauge India’s interest in light of her joining RCEP, I do not get an answer in the affirmative; neither Gandhiji’s policy of self-reliance nor my wisdom allows me to join RCEP”. Interestingly, when he spoke of Gandhiji and his wisdom, it is inexplicable as to why he failed to convey the same wisdom to Mr Piyush Goyal, Hon’ble Commerce Minister of India. Why was the decision of wriggling out of the deal not taken at the ministerial level itself? Was there an intention to earn extra political mileage by way of augmentation of aura around the Prime Minister? No doubt, the decision was good and in the interest of farmers; but should the decision to set the deal on the backburner have been taken with the recent set back to BJP government in Maharashtra elections, wherein the farmer belt reportedly voted against the BJP?

Another factor in focus is the fear of China dumping its goods/products in India if RCEP would have been signed. It is a fact that India has FTA with several ASEAN countries and there are countries like Singapore with whom India has both double taxation avoidance agreement (DTAA) and Free Trade Agreement. China is embarking on these countries to dump its products in India, and we are therefore vulnerable to Chinese products and their dumping in the Indian market.

It is equally necessary for the government to bring into the public domain, as to what steps it has taken to revisit the FTA, with other ASEAN countries, which are being abused by China. And if no substantial steps have been initiated as of now, how can India assert its claim to protect the interest of our farmers in the real sense? Hence, there is no meaning in politicising the whole issue by depicting this move of the government as a victory.

It is also a fact that all BJP leaders and allied organisations, and even bureaucracy, were not on the same page. Ashwini Mahajan, National Co-Convener of Swadeshi Jagaran Manch in his interview to The Wire, said that, since 2015 and 2016, when Ms Nirmala Sitaraman was commerce minister, it was clearly stated that India was ready for the RCEP deal. However, it seems that the bureaucrats went overboard while making offers. He further stated that Piyush Goyal also expressed that this deal was not a win-win for the domestic industry. The question comes therefore as to who was spearheading this deal in India? And why did our political leaders fail to take the decisive step to reprieve the RCEP deal much before?

Down to Earth published a story under the heading ‘Don’t drive Indian Farmers to Suicide through RCEP’, and it is apt to reproduce a relevant portion as follows:
“Ideologically, this government is committed to cow protection. Imports of wheat and edible oil reduced the availability of cattle feed in India. That impacted the production cost of milk in India. Due to continuous loss, many people dumped their cows in the street or sold them to the slaughterhouses. If milk imports from the United States or RCEP countries are allowed, it will send lakhs of our cows to the slaughterhouses. Thus, a government which shows itself as ‘cow protector’ will end up as ‘cow killer’.”

The issue of cow breeding, cow protection is at the centre stage in India nowadays. Any dent to that sector would hurt the core BJP vote bank in northern India, which is majorly a cow belt in this country. So, is that the reason government backtracked at the last moment; to protect its vote bank, especially due to the upcoming Jharkhand elections?

Last but not least, the political reason for the same is the United States of America (U.S), who has entered into a long-standing trade-off with China. The signing of RCEP means greater access to Chinese products into the Asian market including India, which is one of the biggest markets in the world. This, in turn, it would have been a serious blow to the US products, by way of strong competition from Chinese products. Also, the deal would have provided a cushion to China, for the loss it bore, due to the trade war with the US.  And, hence, the US might have pulled all stops in order to convince India not to go for the RCEP deal.

So, is politics influencing economics or is it the other way round? Although it is a tough question to answer, in this particular RCEP issue, the answer seems to be clear.


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