'Indian farmers can't compete.' In this picture taken on October 30, a donkey is being loaded on a truck to be transported away after being sold ahead of the donkey fair at Vautha village, some 50 kms from Ahmedabad. Photo: AFP / Sam Panthaky

Indian farmers and businesses on Tuesday hailed Prime Minister Narendra Modi’s decision to opt out of a sprawling Asian trade pact, with the country’s largest dairy producer Amul thanking the premier for “supporting livelihoods.”

New Delhi’s 11th-hour rejection of the Regional Comprehensive Economic Partnership (RCEP) – which was meant to account for 30 percent of global GDP and loop in half the world’s population – comes as India battles slowing manufacturing and consumption.

The pact would have increased India’s access to other Asian markets, but New Delhi feared its domestic industries would be hit hard if the country was flooded with cheap made-in-China goods, particularly in key employment sectors such as agriculture and textiles.

In a tweet late Monday, Amul applauded Modi’s “exemplary leadership and support” to dairy farmers, who would have been exposed to more competition under the RCEP.

“Your vision of supporting their livelihood will help [in] doubling their incomes and make India stronger,” it said.

Praveen Khandelwal, secretary general of the leading lobby group Confederation of All India Traders, released a statement to AFP warning the deal would have allowed Chinese manufacturers to overwhelm “the Indian market with made-in-China products at very low prices … thereby creating a disequilibrium.”

BM Singh, convenor of the All India Kisan Sangharsh Coordination Committee, said the rejection of the deal was “a huge victory for farmers.”

“We should not go for an open agreement like the RCEP, simply because we can’t compete with other big countries,” Singh told AFP.

“It’s like throwing someone who is 25 kilograms [55 pounds] into a boxing ring and asking him to compete with an opponent weighing 100 kilograms.”

‘Reeling economy’

Some small business owners welcomed the move but said it would not be enough to sustain their industries or make them competitive.

Shaikh Mobinuddin, a plastics manufacturer in Mumbai’s massive Dharavi slum, said the cost of setting up a business in India remained prohibitive while the process was excessively bureaucratic.

“Currently, the situation is pretty bad with policy paralysis, lack of infrastructure and capital available for businesses. We are not able to grow most of these small-scale businesses,” he told AFP.

Experts were divided on Modi’s decision, with some warning that New Delhi, which has a long history of protectionism, may lose out as it tries to become a more globally competitive economy.

“In an era in which manufacturing requires the ability to become more – not less – integrated into global supply chains, this decision appears for the moment to make it harder to boost manufacturing in India,” Council on Foreign Relations senior fellow Alyssa Ayres wrote.

“The central issue for the Indian government isn’t in the wording of a trade deal, but in the competitiveness of the Indian economy,” Ayres added in a blog post underlining the need for further reforms to kick-start growth.

Others cautioned that India was not ready to cope with the influx of cheaper products amid the downturn.

“India’s economy is currently reeling under some stress and it wouldn’t have been the right time to take a decision which possibly could have had a large impact on various sectors of the economy,” Drip Capital co-founder Pushkar Mukewar said.

India’s pullout is nevertheless seen as a blow to the deal, which now includes all 10 Association of Southeast Asian Nations (ASEAN) states plus China, Japan, South Korea, Australia and New Zealand – but not the United States.

The remaining members are aiming to sign it next year after reviewing an agreed draft text.


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