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Temporary Relief


The stiff resistance against India signing RCEP (Regional Comprehensive Economic Partnership) by the Opposition,  farmer organizations and even pro-government sangh parivar outfits including Swadeshi Jagran Munch,  have finally borne fruit.  India decided to withdraw from RCEP, with the prime minister Narendra Modi stating at the ASEAN summit in Bangkok that India will not sign the agreement.  The reason for India's disagreement which Modi cited is that the terms of the agreement are not balanced enough to benefit all parties.  The push back is a big relief,  albeit temporary,  for the country's farmers,  small-scale industries and traders in general.

In addition to ASEAN countries Brunei, Cambodia, Indonesia, Laos, Malaysia,  Myanmar,  Philipppines, Singapre, Thailand and Vietnam,  six other countries including India, Japan, China, South Korea, Australia and New Zealand partitipated in the free trade agreement talks for RCEP.  If India had opted to sign,  the small and medium scale industrial and agriculture sectors would have been in crisis.  For,  the lifting of import tariff on most of the products would cause a big fall in the price of domestic products with a resultant hit on output.  For example,  items from China - the sixth largest  exporters of agricultural products – such as  pulses,  onion,  garlic,  apple,  frozen chicken and fish would have flooded and captured the Indian market.

Although for the end consumer this would appeal as beneficial and profitable,  India  which is already going through  a severe negative balance of trade position,  would have taken a hard beating.   Kerala is one of the states to be most adversely affected by a tariff-free import regime. An estimate says that 25 lakh families are solely supported by agriculture.  Kerala's cultivation consists of paddy,  coconut,  pepper,  cashew,  cardamom,  cattle-rearing, coffee,  tea,  rubber and banana.  65 per cent of those who depend on cattle-rearing consists of women and landless labourers.   With several of these sectors becoming more and more uneconomic by the day,  unrestricted imports are sure to land them in starvation.  For labour is much cheaper in countries  like China, Malaysia, Thailand,  Philippines,  Cambodia,  Vietnam,  Myanmar and Laos, than in Kerala and the productivity in those countries is also far higher.

Kerala,  already faced with a crisis in coconut, rubber and other sectors,  hazards being wiped off the agricultural map with the signing of RCEP.    And India as a market will not be able to survive an unfair competition in dairy production against Australia and New Zealand,  the world's top dairy producting countries.  The same is the case with light machinery.  Unemployment,  already at an alarming level,  will become more acute with such imports of cheaper products.   It is in realization of such facts that stiff resistance to RCEP was raised by all parties across the political spectrum and the Modi government had to bow before that.   But a relevant question is for how long.

Other countries in the free trade agreement round have dispersed from Bangkok with the optimism that India will soon sign RCEP.   Since no trade pacts can be unilateral,  we may not be able to hold out for long.  Ten countries of ASEAN and five other countries are also the markets for Indian products.  If they hike import tariffs,  Indian products cannot sustain that for long.   The trade deficit with other RCEP countries now stand at Rs 7.4 lakh crore,  which forms just 20  per cent of our exports.  But imports from those countries to India is 35 per cent.   The ultimate way out of this situation is to bring down cost of production to the minimum and raise quality using modern technology and thus attain competetiveness.   If better products are made available at lower prices,  domestic market itself will have the capability to survive.   It is high time that the government and the people turned their attention to this positive factor of the equation.

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