India's Strategic Exit: Navigating Trade Imbalance with China

India's decision to abstain from the China-backed RCEP trade agreement was strategically wise to avert exacerbating its trade deficit with China. Given existing trade imbalances and challenging negotiations, India's stance is seen as protective against further economic disparity, despite differing opinions from domestic economic leaders.

India's strategic choice to exit the RCEP, a China-backed trade bloc, is proving sagacious given the country's substantial trade deficit with China. On Friday, think tank Global Trade Research Initiative (GTRI) reaffirmed the decision, citing potential risks of worsening economic imbalances with zero-tariff Chinese imports.

GTRI highlights the existing USD 85 billion trade deficit with China as a critical factor, emphasizing India's protective move against a surge in imbalanced trade conditions that favor China disproportionately. As things stand, ASEAN's and Japan's trade deficits with China have worsened significantly since joining RCEP.

Despite some internal calls for joining broader trade agreements, such as from Niti Aayog's CEO, India's decision remains a defensive measure. With existing trade agreements with 13 RCEP members, India aims to safeguard its economic interests from China's expansive market strategies.

(With inputs from agencies.)