Why in News?

• More than six years after opting out of the Regional Comprehensive Economic Partnership (RCEP) in 2019, India has effectively secured most of the economic benefits of the grouping without formally joining it.
• The recent conclusion of the India–New Zealand Free Trade Agreement (FTA) marks a significant milestone—India now has FTAs with all RCEP members except China.
• This reflects a calibrated trade strategy balancing market access, strategic autonomy, and economic security.

What’s in Today’s Article?

• What is RCEP?
• Why India Opted Out of RCEP (2019)?
• The ‘RCEP Minus China’ Strategy
• India–China Trade Framework
• Why RCEP Would Have Been Riskier?
• India’s FTAs with RCEP Members
• Key Highlights of India–New Zealand FTA
• Challenges and Way Ahead
• Conclusion 

What is RCEP?

• RCEP is the world’s largest trading bloc, comprising -
  • 10 ASEAN countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam)
  • Plus Australia, China, Japan, South Korea, and New Zealand
• It covers nearly 30% of global GDP and population, and aims at tariff liberalisation, supply chain integration, and trade facilitation.

Why India Opted Out of RCEP (2019)?

• Key reasons:
  • China factor: Fear of near duty-free access for Chinese goods flooding Indian markets.
  • Manufacturing asymmetry: China’s superior manufacturing competitiveness.
  • Trade deficits: Concerns over widening deficits, especially with ASEAN and China.
  • Inadequate safeguards:
    • Weak protection for sensitive sectors (agriculture, MSMEs, manufacturing)
    • Limited flexibility in tariff liberalisation timelines
• Official stand: The Indian PM stated that RCEP in its existing form did not reflect agreed guiding principles, and failed to address India’s “outstanding issues and concerns”.

The ‘RCEP Minus China’ Strategy:

• Core idea: Bilateral FTAs with 14 of 15 RCEP members, exclude China from a full-fledged FTA, and retain tariff sovereignty and policy space.
• Expert view:
  • Described as “smart risk management”, delivers market access without systemic vulnerability.
  • Superior to both joining RCEP, and signing a direct FTA with China.

India–China Trade Framework:

• APTA: India and China are part of the Asia Pacific Trade Agreement (APTA), which is a preferential Trade Agreement (PTA) with limited tariff concessions on select items.
• Significance: Prevents blanket tariff elimination, limits exposure to Chinese imports. 

Why RCEP Would Have Been Riskier?

• Integrated structure of RCEP diluted country-specific safeguards, and limited control over rules of origin.
• Indirect entry of Chinese goods via ASEAN and other RCEP members.
• No phased liberalisation tailored to India’s sensitivities.

India’s FTAs with RCEP Members:

• Pre-2014 agreements:
  • ASEAN–India Trade in Goods Agreement (AITIGA) – 2010
  • India–South Korea Comprehensive Economic Partnership Agreement (CEPA) – 2010
  • India–Japan CEPA – 2011
  • Issue: AITIGA led to a sharp rise in India’s trade deficit with ASEAN.
  • Status: Renegotiation underway, limited progress so far.
• Post-2014 developments:
  • India–Australia Economic Cooperation and Trade Agreement (ECTA) – 2022 – Early-harvest deal, and ongoing talks to expand scope.
  • India–New Zealand FTA – Negotiations concluded December 2025.

Key Highlights of India–New Zealand FTA:

• Zero-duty market access for Indian exports.
• Investment commitment of $20 billion.
• Strengthens India’s presence in the Pacific and Indo-Pacific trade architecture.
• Completes India’s bilateral coverage of RCEP (except China).

Challenges and Way Ahead:

• Persistent trade deficits with ASEAN countries: Slow renegotiation of legacy FTAs like AITIGA. Rebalance existing FTAs - Stronger safeguards, reciprocity-based market access.
• Domestic competitiveness: MSMEs and manufacturing still need productivity enhancement. Strengthen domestic manufacturing - Align with Make in India and Atmanirbhar Bharat.
• Geopolitical pressure: Strategic plurilateralism - engage selectively without compromising autonomy.
• Global supply chain realignments: Supply chain resilience - Leverage FTAs for diversification away from China-centric chains.

Conclusion:

• India’s post-RCEP trajectory demonstrates a mature and pragmatic trade strategy.
• By pursuing an ‘RCEP minus China’ approach, India has preserved tariff and policy autonomy.
• The India–New Zealand FTA completes this strategic arc, reinforcing India’s position as a selective, interest-driven participant in global trade, rather than a passive signatory to mega trade blocs.
• This approach aligns well with India’s long-term goals of economic resilience, strategic autonomy, and sustainable integration into global value chains.