India’s GDP growth rate for the first quarter of the financial year 2021-22 stood at 20.1% as reported by the country’s National Statistical Office (NSO). This announcement came on the heels of a contraction of 7.3% in the previous financial year.
Though the quarterly numbers this time might seem to suggest that India is back on track, the numbers are not even remotely close to the pre-pandemic levels of growth. Academics and public finance experts have warned that the recent figures showcase only the comparison to last fiscal year. Any complacency might result in the continuation of stagnant economic growth.
The Indian economy had seen sluggish growth even before the pandemic itself. Covid-19 has exacerbated the situation and the floundering economy has not been able to pick up growth as anticipated.
There is a need to reinvent the way the economy is functioning to stimulate the necessary growth. India’s role as an export-oriented economy has never been bright. This is something the state can tap into. The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) can help India and the region rebound from the slump and develop economic heft on the global stage.
Multilateral forums in the Asian region have seen hits and misses in terms of the goals achieved. While the Shanghai Cooperation Organization (SCO) has been successful in terms of economic engagement, the same cannot be said of others.
India has been in search of a forum where it can project itself as an enabler and not just an outside member. The deteriorating relations with China add to India’s reluctance to play an active role in multilateral forums with the Chinese.
The India-led South Asian Association for Regional Cooperation (SAARC) has shown no signs of progressing either in terms of diplomatic or economic relations. The everlasting hostility between India and Pakistan has stymied the forum from conducting any credible business.
India’s role in other forums such as the Indian Ocean Rim Association (IORA) and Association of Southeast Asian Nations (ASEAN) has been dormant, with very little progress made in recent times. This leaves BIMSTEC.
BIMSTEC is one organization where India can take on a leadership position and is composed of members that India shares positive diplomatic relations with. It also is home to some of the fastest-growing economies in the world, namely Bangladesh, Thailand, and Vietnam, which are looking to improve their global trade volume. This serves as a perfect platform for India to take the initiative to promote regional economic cooperation.
An alternative to RCEP
India opted out of the Regional Comprehensive Economic Partnership (RCEP) in November 2020 in order to protect its domestic markets in the aftermath of the Covid-19 outbreak. Domestic economists deemed it a lost opportunity for India to assert itself in the global supply chains. Its Quad counterparts Japan and Australia still look to bring India back to the table, but it looks like a lost cause now.
Establishment of a free trade area (FTA) within BIMSTEC could help India improve its manufacturing output and set itself on the path of becoming an economic powerhouse. This could serve as an alternative to RCEP, especially for India.
There have been talks of emerging economies displacing China in some of the global supply chains after the pandemic. This partnership could help drive forward the vision of reducing dependency on China for the supply of critical materials.
While RCEP would have been a much tougher deal to negotiate for India, an agreement within BIMSTEC could be tailored to its needs thanks to its economic clout. This could serve as a double blessing for India, leading a regional economic trade bloc and protecting its domestic interests at the same time.
A new trade bloc
Though India has signed separate bilateral trade agreements with some of the BIMSTEC members, a collective free-trade agreement would in effect makes the forum a new trading bloc with significant leverage. This would allow cross-border collaboration across multiple sectors including energy, environment, and defense.
When the Indo-Pacific region faces a multitude of critical issues, such as tackling climate change and protecting strategic interests, a trade bloc could ensure easier transfer of technology and access to multiple markets.
It is also an open secret that India and the European Union have been in talks for a long time trying to finalize a trade agreement. This deal has never materialized despite long, drawn-out negotiations. This could be rectified by making a deal on behalf of the BIMSTEC trading bloc.
The EU, as a whole, might agree to a deal that gives it broader access in the region. India, on the other hand, could leverage its position in the bloc to obtain a mutually beneficial deal for itself and the region as a whole.
One of the founding principles of BIMSTEC was the prospect of economic partnerships. While diplomatic relations among the BIMSTEC countries have always been highly positive, engagement in other domains is yet to see light. There have been talks of closer economic ties among the members but it has never taken off in the form of a trade agreement.
Finalizing an FTA must be a priority in the coming months for the states involved. This could accelerate economic growth in the region and help address key sectoral issues.