26 The Finapolis l DECEMBER 2015
ECONOMY medium and small industries that contribute nearly 60% to India’s exports. Also, further simplification of processes and procedures and revamping of the export promotion regime have become essential. There seems no clear consensus in the Indian government on whether enhanced market access through the TPP covering 12 countries will be worthwhile. However, the TPP would involve huge costs for the protected Indian industries. India would need to prepare itself for higher standards than ever attempted. However, the long term gains for India if it joins the TPP cannot be overlooked which may outweigh the costs.
ter integration into the global economy will have to be achieved. Ultimately, major structural changes from infrastructural development-- legislative to institutional reforms and human resource development, will determine India’s success in becoming part and parcel of the complex supply chain-led international trade and investment. India should seriously push for finalising new bilateral FTAs with some TPP members to dilute the impact of trade and investment diversion due to the TPP. It will be difficult for India to easily agree to several measures under the TPP. Like adhering to the environmental standards due to its lower stage of economic development and conceding to the kind of IPRs protection regime that the United According to the Center on Global States wants, especially for its huge geTrade and Investment study, India’s nomneric drug manufacturing industry. India inal GDP is likely to trim by more will not be able to bear the expectthan 1% because of trade and ined sweeping tariff cuts and the Indian exports are most likely to vestment diversion due to the sweeping labour standards of the TPP. This will entail some revedeveloped West. take a hit as the TPP provides nue and job losses as well. One of the best options can be Global supply chains make up through the finalisation of the special concessions to some of its 80% of international trade today. RCEP. The snag is that the RCEP key partners to purchase from The TPP will further intensify also includes seven countries, this trend. By not joining the TPP, both developed and developing, other TPP member countries India could lose out on integratwhich are also members of the ing its small and medium-sized TPP agreement. China is in the enterprises into these production this context, the TPP that excludes India RCEP but not in the TPP. Hence networks. may not be good news for the country. tensions are bound to crop up. Indian exports are most likely to take Furthermore, since almost 60% of In Apart from finalising the RCEP, India a hit as the TPP provides special concesdia’s GDP is tied to the services industry, can use its current trade negotiations sions to some of its key partners to pura large portion being in IT and IT-enabled with the EU, Australia, Canada, and New chase from other TPP member countries. services, the regulatory harmonisation Zealand, as a stepping stone to start rais The FDI inflows into India which startexpected to be enacted in the TPP could ing its standards as well as proposing ed to pick up from the mid-2000s may get greatly harm India’s competitive edge in mitigating measures to assuage concerns affected. Today, India is one of the largest these sectors. of the Indian Industry. India can open its recipients of FDI in the developing world market further while formulating prodand the largest in South Asia. The TPP uct-specific rules on a case-by-case basis will surely incentivize foreign investment that will facilitate India’s policies like among member states, thereby decreas It needs to be debated whether India can ‘Make in India’. It can also begin to re-
India’s nominal GDP is likely to trim by more than 1% by not joining TPP
What India will miss by not joining TPP?
What will be the best course for India to follow?
ing the relative attractiveness of India as a destination among TPP members. The TPP also involves regulatory harmonization. The MNCs under the aegis of the TPP do not have to face regulatory hostilities in host countries or struggle with Indian laws. India’s legislations do not align well with global standards. In
take steps to mitigate the likely negative impact on its exports, investment inflows and technology imports due to the new generation of mega regional agreements. India’s share forms only 2.1% in global trade, five times less than China’s (also outside the TPP). For firming up India’s economic and geo-political heights, a bet-
form its intellectual property policy in certain areas, like IPRs on music and films, while also safeguarding its generic medicine industry. In short, India must decide fast on an interim strategy as a part of a well-studied long term course to cope with the postTPP era. F