Kairav Narendran

Trade in India: The Effects of Trade Liberalization

Started Mar. 17, 2025

Abstract or project description

This paper investigates the reasons for India’s withdrawal from the Regional Comprehensive Economic Partnership (RCEP) and also investigates the reasons for the growing trade deficit between India and China. The paper compares India’s economy to other emerging markets in the RCEP, like Vietnam, and highlights the benefits that Vietnam received from its involvement in the RCEP. This paper reviews the strengths and weaknesses of both the Indian and Chinese economies and explains concepts like consumer/producer surpluses and comparative advantages. Additionally, further research is done on the growing consumer market in India, which is primarily caused by India’s growing labor force. The objective of this paper is to convince the reader that India should rejoin the RCEP, under certain conditions. The paper argues that reintegrating in the RCEP will reduce reliance on China for imports, while also protecting India’s own industries by setting certain guidelines for the agreement. The analysis demonstrates that the trade imbalance between China and India is ingrained in the two nations' economies and is not merely a temporary issue. Because of its sophisticated factories, extensive worldwide supply chains, and enormous production size, China is a leader in industries like electronics, machinery, and other essential commodities. India is largely dependent on these imports, not just because Chinese goods are less expensive but also because many of these goods aren't produced domestically in sufficient quantities or with the same level of quality. This mismatch is likely to persist even with tariffs in place unless India makes a concerted effort to increase its own manufacturing capacity and establishes wise trade relationships. This paper suggests rejoining the RCEP with stringent requirements, including targeted protections for vulnerable industries like dairy and small-scale manufacturing, strict rules-of-origin to avoid indirect Chinese imports, and progressive tariff decreases to allow local companies time to adapt. This strategy, when combined with investments in domestic manufacturing capacity, seeks to lessen India's excessive reliance on China while establishing it as a competitive participant in regional and international trade networks.