The decision, taken during the informal summit between Prime Minister Narendra Modi and Chinese President Xi Jinping, will see finance minister Nirmala Sitharaman and Chinese vice-premier Hu Chunha working on details, which could also result in easier visa rules for Indian businessmen.
The discussions on the regional comprehensive economic partnership, seen as the world’s biggest FTA in the making, was Modi raising the need for a “balance” that kept services and investment in sight. “President Xi noted this and said China and India are ready to discuss this further and Indian concern will be taken into account. It was a brief discussion,” foreign secretary Vijay Gokhale said.
Modi and Xi also agreed to explore manufacturing partnerships. Modi suggested that India and China could identify sectors where investment could flow and help create jobs and enhance markets for both sides, Gokhale told the media.
The government has been seeking more Chinese investment into the country, including in infrastructure and electronics, as a possible way to reduce imports and at the same time boost local manufacturing and job generation.
India has for long compalained that its exports- including medicines, meat and food products such as rice – face restrictions across the border with software companies too finding it tough to do business in China. In the past Beijing has agreed to address concerns but did little to change the situation on the ground.
As a result, India has run up a massive trade deficit with China, which topped $53 billion during 2018-19. While China accounted for over 10% of India’s goods trade, its share in India’s trade deficit was close to 30%.
With RCEP expected to tilt the balance further towards China, Modi used his bilateral discussions to secure a more favourable outcome for India and suggested that due weightage to services and investment be given in the mega free trade agreement and not just focus on reducing import duties on goods, a situation that is fraught with the risk of opening floodgates for Chinese imports.
Negotiations for setting up the new trade bloc comprising 16 countries have entered the last lap with leaders from the Asean countries apart from South Korea, Japan, Australia and New Zealand, China and India expected to agree to the broad contours next month. Ministers from the negotiating countries are currently working out the details, amid fears that RCEP will result in a massive surge in imports from China as India will remove import duty on nearly 80% products.
The concern is that India is not getting much in return, especially on the services front as Indian software professionals and nurses face visa hurdles.
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