India’s Act East Policy Post RCEP

Manas Kakumanu

Image source: newshiksha.com

The Regional Comprehensive Economic Partnership (RCEP) has gained a lot of attention because of various ongoing trade wars around the world. The agreement can even bolster ties among the participating nations. So, does India’s withdrawal from the RCEP affect its Act East Policy?

India’s withdrawal from the RCEP is significant and is based on its national interest. The RCEP agreement certainly raised questions on India’s credibility as a reliable economic and strategic partner. India because of its strategic geographical location, huge market and being one of the largest spenders of defence in the region has been a prominent player in the region. With liberalisation and globalisation, India has emerged as a player with the potential of changing balance of powers in the international system and cannot be ignored by the international conglomerates.

India’s withdrawal from the RCEP can have overarching impact on its Act East Policy, since the primary objective of the policy is to improve ties with ASEAN and East Asian Nations. Withdrawing from the agreement is deterrent to its core objective and its impact can be seen on various regional organisations.

India’s trade deficit with ASEAN is gradually increasing annually, standing at $105 billion, which is bad for Indian economy. So, withdrawal from the RCEP is a coherent move. The engagement between the nations will keep on increasing irrespective of the RCEP because of the growing connectivity. The cultural ties between Indian’s North-eastern states and nations in South East Asia under Act East Policy will continue to remain intact. However, India needs to be concerned about China, especially with its ambitious projects such as the Belt Road Initiative (BRI), and North Korea that are terrorising the region in the east.

The BRI is a mega project undertaken by China in 2013 to construct infrastructural projects and revive old silk trade routes. But critics say Beijing is playing debt trap diplomacy, making countries to fall in debt and gain strategic control over the countries who are part of the BRI. ASEAN countries such as Laos, Cambodia, Malaysia, Indonesia and Singapore are part of the initiative. With the RCEP and BRI on its hold, China has a better chance to exert influence on these countries and region. North Korea on other hand shares bilateral ties with both ASEAN and India for decades. But its strong ties with China and its nuclear provocation in the region is a concern to India’s Act East Policy.

In the meantime, New Delhi has shifted its focus from SAARC to BIMSTEC in the last few years. As a result, BIMSTEC has proven to be an important platform under India’s Act East Policy. India is the only nation with huge economic and military prowess and enjoys a significant amount of influence on the forum. BIMSTEC has evolved to be an important bloc and good alternative to SAARC because of the ongoing tensions with Pakistan and other nations and the significant economic potential of member states in BIMSTEC. Modi government figured the potential of BIMSTEC and has spent a huge amount of resources on it in recent years. Some of the mega projects under BIMSTEC are Trilateral Highway connecting India, Myanmar and Thailand, BBIN (Bangladesh, Bhutan, India and Nepal) Motor Vehicle Agreement and Kaladan Multi-Modal Transit Transport Project that seeks to connect India and Myanmar. Thus, through BIMSTEC India can counter Chinese growing influence in the region.

Mekong-Ganga Cooperation (MGC) is relatively smaller compared to others but it has its own significance under Act East Policy. MGC is the only platform that involves five ASEAN nations. With changing economic dynamics, India can use MGC as a platform to exert its influence on post-RCEP economic system.

India has Free trade Agreements (FTA) with almost every participating country in the RCEP except China, New Zealand and Australia. In that way, withdrawing from the RCEP can be seen as a good decision since it basically leave the door open for FTA with China, leading to furthering its trade deficit. India’s withdrawal is based on its interests and past mistakes. Even though it is against Act East Policy, India chose economic and strategic interests which play a dominant role in our future relationship with ASEAN and East Asian nations.

India after its independence has faced diplomatic crisis with the western nations because of the differences in ideology but that has changed with the collapse of the Soviet Union and has opened the pathway in search of new friends. With India’s economic reforms of 1991, doors were opened for strong bilateral and multilateral engagements with the outside world. Thus, in that way, Act East Policy will act as a medium to further the relationship with ASEAN and East Asian Nations.

With growing challenges and obstacles, India should act diligently on its internal and external policies. The previous FTAs with other nations did not work exactly as envisioned because of its poor diplomacy. In that way, a withdrawal from the RCEP is not a positive step for India. To be a regional power, India should focus on its domestic competitiveness and its bilateral relationship with the countries in the Southeast and Far East to its advantage.

Manas Kakumanu is Research Intern at CPPR. Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research.