Reasons Why India quit RCEP?


India is no longer a part of the mega Regional Comprehensive Economic Partnership (RCEP) agreement. This blog can explain why India quit RCEP.

The Regional Comprehensive Economic Partnership is a free trade agreement between Asian countries. Mainly 15 countries Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, Thailand,  New Zealand, Philippines, Singapore, South Korea, and Vietnam are the current members of it.

How is RCEP different from ASEAN?

ASEAN developing eastern nations

Six of these countries are together a part of another group called the ASEAN. On 15 November 2020, the annual ASEAN virtual summit took place which was hosted by Vietnam this year.

The motto of the RCEP agreement was “ Pull the economic center of gravity back towards Asia”. Talking about the formation of ASEAN it was signed in Bangkok, Thailand with its five founding countries that are Indonesia, Malaysia, Singapore, Philippines, and Thailand in 1967.

Fight againts communalism

ASEAN was established to bring about peace and stability; and to unite these countries together to fight for a common cause of communalism and achieve a goal of cooperation.

What makes RCEP important?

Largest trading area

Coming back to RCEP,  in today’s scenario RCEP forms the biggest trade bloc. With its member nations, it serves as the largest trading area with minimal barriers to trade.

Trade among the regions that are part of the RCEP is much more beneficial and smooth as compared to other zones.

Another reason that makes the RCEP agreement important is that all these member countries contribute a total of 30% of the world GDP ( Gross Domestic Product ); and a significant contribution is seen in the population as well.


How is RCEP beneficial?

Import and export duties

Countries usually enter into such free trade agreements to enable smoother trade with low import and export duties encouraging trade between nations.

Such a condition is an optimal situation for the growth of nations and the economy as a whole. The participant countries become relatively better off, and a rise has been observed in their respective GDP’s.

China, Japan, and South Korea are among the largest of all the economies in the world. They have also come together to be a part of the RCEP.

Why it is not good for India?

Now the talk of the town remains that if the RCEP and the whole concept of having free trade among countries are so benefitting for the countries and its economies.


Then why India chose to quit RCEP? Well, it all goes down to the sum of trade that a country holds with the other nations involved.

Trade deficit

To break it down in simpler terms a free trade agreement is only beneficial for a country; if the exports of the country are greater than the imports.

There should be an import surplus in a country or an existing surplus. Only then the country looks forward towards having one to reap the benefits of any such free trade agreement.

If we minutely examine India’s equation with each of the member countries involved in the RCEP; then it is visible that India holds a trade deficit with most of them. Thus entering into an agreement would further deteriorate the situation.


India- China Trade Deficit

India china trade situation

Considering India’s trade situation with China. India has a very significant gap in the amount of goods imported and the amount of goods exported. India is in a high trade deficit (when the value of exports minus imports is negative).

If India enters the RCEP of which China is also a member nation, India would have to further reduce the import duties.

Read our blog Can India Boycot Chinese goods?

Harm for Indigenous Industry

That will eventually lead to more of imports in the country than before. Such a condition will create a situation where India wouldn’t be able to promote its export and indigenous industry.

And it would also not be wrong to speculate that a condition as was in the times of the Britishers can arrive again.


When India became a dumping ground of the manufactured European products. To prevent such a condition to arrive again it is better that India quit RCEP.

If we compare the history and the speculative future then the Indian situation would be far worse than it was once in 1800.

The Covid Crisis

Atmanirbhar bharat

The present situation of the 2020 pandemic where the Indian government is leaving no stone unturned to promote Indian exports. consequently, more and more industries are coming up with various schemes under the “ Atmanirbhar Bharat” program.


Signing the RCEP would not have been a wise decision. Moreover, it is assumed that the RCEP member countries are planning to reduce the duty up to 90%. And would also achieve totally free trade with zero duty goods between themselves in the coming years. In such a case there is no chance for Indian industries and economy to climb the ladder.

sanskriti gupta | GENUINE MATTERS
Sanskriti Gupta
Like researching, reading and dwelling deep in the topic to bring out the best of any subject matter, because Being opinionated is important and appreciated only if you have the appropriate and right amount of knowledge and facts to back up your material with.

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