 "World Bank urges India to reconsider RCEP stance for $1 trn export goal")
The World Bank, on Tuesday, urged India to re-evaluate its regional integration strategy, including its decision not to join the Regional Comprehensive Economic Partnership (RCEP), as part of its plan to achieve the $1 trillion export target by 2030.
“India does not participate in mega trade blocs such as RCEP, while other South Asian countries like Bangladesh and Sri Lanka have recently indicated interest in integrating with this East Asian regional trade and global value chain (GVC) hub. As smaller, regional economies consider trade agreements beyond South Asia, India may want to re-evaluate its regional integration strategy, including its position on RCEP. In an ideal situation, more emphasis on plurilateral and multilateral cooperation would be beneficial,” the World Bank said in its latest India Development Update report.
However, Auguste Tano Kouamé, World Bank’s India country director, told reporters that the final decision rests with India.
“Trade is good, and being part of a trading bloc is good. We do not have specific recommendations regarding individual trading blocs. It is up to countries, including India, to decide whether to join RCEP or not. We do not engage in trade negotiations between countries,” he added.
The report highlighted that India has sizeably increased its use of protectionist measures, such as higher tariffs and non-tariff barriers, as well as industrial policies affecting trade in goods and services. Despite this, the report underscored the crucial role of trade in driving growth.
It noted that India’s trade deal with the European Free Trade Association excludes key areas such as digital trade, e-commerce, pharmaceutical, and micro, small and medium enterprises, which limits its overall impact.
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In the chapter titled India’s Trade Opportunities in a Changing Global Context, the World Bank reported that India is punching below its weight in trade and not fully leveraging GVCs. As China moves away from low-skill manufacturing due to rising wages, India has the potential to capitalise on this opportunity.
The report noted that India has not been a major beneficiary of China’s shrinking market share. India’s share in global exports of apparel, leather, textile, and footwear grew from 0.9 per cent in 2002 to a peak of 4.5 per cent in 2013 but declined to 3.5 per cent in 2022.
Countries such as Bangladesh, Vietnam, Germany, and the Netherlands have benefited more from China’s reduced role in low-skill manufacturing.
“Despite its growing economic strength, India’s trade in goods and services has been declining as a percentage of gross domestic product over the past decade and is lower than in countries at similar stages of development,” the World Bank said.
The report recommended a three-pronged approach to achieving the $1 trillion merchandise export target by 2030: reducing trade costs, lowering trade barriers, and deepening trade integration.
“India will need to diversify its export basket even further and enter new markets,” the World Bank said.
Regarding the carbon border adjustment mechanism, World Bank economist Nora Dihel said that it represents a huge export potential for India. The report also highlighted that India could capitalise on this opportunity by investing in clean technology, promoting sustainable production and consumption, and implementing policies to reduce greenhouse gas emissions.
The report also noted that nearly 3,000 new trade-distorting measures were imposed in 2023, three times as many as in 2019, with a major proportion enacted through industrial policy. The most active practitioners included the US, China, India, and many European Union economies.