India’s Potential Return to RCEP: A Strategic Pivot in Global Trade

In the rapidly evolving landscape of global trade, India is signaling a significant shift that could reshape its economic future and regional ties. After exiting the Regional Comprehensive Economic Partnership (RCEP) nearly five years ago over concerns about market access and trade imbalances, the country is now warming up to the idea of rejoining the world’s largest free trade agreement. This move is driven by escalating trade tensions with the United States and an improving relationship with China—two dynamics that are reshaping trade strategies in Asia.

Why India Left RCEP in 2019

India’s initial withdrawal from RCEP in November 2019 was rooted in justified apprehensions. Key concerns included:

• A widening trade deficit with China

• Risks to sensitive sectors like agriculture, domestic manufacturing, and small businesses

• The possibility of Chinese goods flooding Indian markets through third countries in ASEAN

• Fear of unfair competition, especially from special provisions allowing indirect exports via Cambodia, Laos, and Vietnam

• Worries that Indian farmers and dairy cooperatives could be hurt by imports of milk and related products from New Zealand

These issues made the trade agreement appear skewed against Indian economic interests, leading New Delhi to prioritize safeguarding its domestic markets.

The Changing Global Trade Environment

What has changed since 2019? The global trade ecosystem has seen seismic shifts. The United States, under previous administrations, imposed heavy tariffs—ranging from 15% to as high as 50%—on several Asian economies, including India. These punitive measures have pushed countries to reconsider their trade alliances.

Meanwhile, India’s relations with China are showing signs of thawing. Recent diplomatic engagements have yielded tangible outcomes, such as China lifting export curbs on critical items like rare earth magnets and fertilizers for India. India, in turn, is exploring easier rules for Chinese investments in specific sectors. This bilateral warmth has re-opened doors to deeper economic collaboration.

Why Return to RCEP?

The RCEP bloc is massive, accounting for 32.6% of global GDP in 2025 and encompassing over 2.35 billion people. It includes all ASEAN nations, China, Japan, South Korea, Australia, and New Zealand, making it a powerhouse for trade and investment. Japan and Singapore have even reserved the right for India to rejoin, signaling regional openness to India's participation.

In this context, India is reassessing the benefits RCEP could offer, particularly:

• Access to diversified export markets

• Alignment with global supply chain realignments

• Opportunities to ease tariff barriers

• Strengthened regional trade cooperation amid US tariffs

Addressing Past Concerns with a New Strategy

India is not rushing back unconditionally. The government has tasked the Research and Information System for Developing Countries (RIS) with conducting a detailed impact assessment. The focus is on:

• Securing written assurances from China and ASEAN countries to ensure fair market access

• Revisiting tariff structures to protect vulnerable sectors

• Considering broader strategies for export diversification and industry development

Experts advocate for a balanced approach that would enable India to leverage RCEP benefits while addressing trade imbalances and non-tariff barriers effectively.

The India-China Trade Dimension

India’s trade deficit with China has ballooned to a staggering $99.2 billion in FY25, underscoring the urgency of recalibrating trade ties. Exports to China have declined, while imports have surged, creating economic vulnerabilities. However, studies reveal a vast untapped export potential to China—estimated at $161 billion—largely in medium and high-tech sectors.

A recalibrated trade strategy calls for:

• Joint efforts between India and China to dismantle tariff and non-tariff barriers

• Transparent, WTO-compliant regulatory frameworks

• Diversification of exports towards high-value products like telecom equipment, aircraft parts, and semiconductors

• Reducing reliance on uncompetitive imports by sourcing from alternative suppliers like Vietnam, South Korea, and the UAE

These measures could not only address the trade deficit but also deepen economic integration constructively.

Conclusion

India’s potential return to RCEP marks a pragmatic response to changing global trade dynamics. While mindful of past challenges, India is exploring ways to harness the economic potentials of being part of the largest trading bloc in the world. By balancing protection of domestic interests with engagement in broader regional markets, India could chart a course that fosters growth, competitiveness, and geopolitical influence in Asia and beyond.

This strategic pivot shows that in a multipolar world, trade diplomacy remains a vital tool in crafting national prosperity—making India's next moves in the RCEP saga a critical story to watch in the coming months.