India has resisted RCEP demands on tariff reduction. India fears the RCEP demand to eliminate tariffs on 90 per cent of the traded goods will have a disastrous effect on its already struggling micro, medium and small sector.

Apart from being reluctant to slash tariffs for political economy reasons, India has expressed its reservations over inclusion of e-commerce in the RCEP talks. The RCEP draft is opposed to data localisation, while India fears the monopoly power of digital giants.

Perhaps exasperated by the slow progress over the talks, China is in favor of a RCEP that consists of Asean plus Japan, China and South Korea. This move leaves out India, Australia and New Zealand. It would seem that India is in a tight spot but the bright side of this story is that there are a number of Japanese, Korean and Chinese companies who would, in fact, prefer a tariff wall for finished goods. Moreover, China is turning into a high cost producer, and needs lower tariffs and a softer currency in days to come. To that extent, India’s export markets in the Asean may not recede in a hurry. India can keep domestic interests in mind, while being flexible in certain areas. For instance, India can offer to liberalise foreign participation in education, accountancy and legal services.