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New Delhi: Pushed by escalating trade tensions with Washington and with its relations with Beijing on the mend, New Delhi is warming up to a deeper embrace of the East by signalling a potential return to an eastern trade bloc that it had walked out of nearly five years ago.
New Delhi: Pushed by escalating trade tensions with Washington and with its relations with Beijing on the mend, New Delhi is warming up to a deeper embrace of the East by signalling a potential return to an eastern trade bloc that it had walked out of nearly five years ago.
According to two senior government officials aware of the matter, India is weighing the possibility of rejoining the Regional Comprehensive Economic Partnership (RCEP), a trade group of 15 countries. India had left the group in November 2019 just before the pact was signed, citing concerns over market access, widening trade deficits, and risks to farmers, domestic manufacturing, and small businesses.
According to two senior government officials aware of the matter, India is weighing the possibility of rejoining the Regional Comprehensive Economic Partnership (RCEP), a trade group of 15 countries. India had left the group in November 2019 just before the pact was signed, citing concerns over market access, widening trade deficits, and risks to farmers, domestic manufacturing, and small businesses.
According to one of the officials cited above, internal discussions have begun in the Indian government on reassessing the costs and benefits of RCEP membership in light of global supply chain realignments, tariff wars, and the urgency of diversifying export markets.
The second official cited above said, “The fresh rethink is being explored as part of a broader strategy to deepen India’s trade engagement with neighbouring countries, especially after strained trade talks with the US." Both officials spoke to Mint on condition of not being named.
In the latest development, China has lifted export curbs on rare earth magnets, fertilizers, and tunnel-boring machines for India following a meeting between Chinese foreign minister Wang Yi and India’s external affairs minister Subrahmanyam Jaishankar on Tuesday, a move seen as a thaw in India-China trade relations amid the current US tariff regime.
On its part, India is weighing easier rules for Chinese investments in select sectors as part of another step to improve ties ahead of Prime Minister Narendra Modi's visit to the eastern neighbour to participate in the Shanghai Cooperation Organisation (SCO) Summit, as reported byMint on 18 August.
The Research and Information System for Developing Countries (RIS), an autonomous body under the ministry of external affairs, has been tasked with conducting an impact assessment of India becoming a member of RCEP, particularly as the Trump tariffs are expected to remain in place for a long period, the second official said.
“India is pushing for written assurances from China and ASEAN nations to ensure greater market access for Indian products in order to make the pact a more balanced agreement," said the first person.
“The idea at this point of time is largely in terms of the opportunities that an FTA can create, and India has also brought in some changes," said Sachin Chaturvedi, director-general of RIS. “If you look at trade compatibility and scope, the ambit within which we had earlier thought of two- or three-tier tariff structures, and the new momentum we are seeing in India-China trade relations, both would have to be factored in. Then some framework for assessment should come up."
Queries sent to the spokespersons of the Prime Minister’s Office, Chinese Embassy in New Delhi, and the ministries of commerce, external affairs remained unanswered till press time.
The RCEP is the world’s largest free trade agreement. As per World Economics, a UK-based data and analysis platform, the RCEP group accounted for 32.6% of Global GDP in 2025 and is home to over 2.35 billion people.
The trade bloc comprises 15 member countries, including all the ASEAN member states — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam — plus China, Japan, South Korea, Australia, and New Zealand. Notably, Japan and Singapore had included a special provision allowing India to return to the bloc at any time.
Experts said punitive US tariffs are pushing eastern economies to make RCEP a more compelling platform.
“The US under President Donald Trump has imposed tariffs of 15-20% on several ASEAN economies, with higher duties of 40% on Laos and 19% on Cambodia," said Srikanth Kondapalli, professor of China Studies at Jawaharlal Nehru University (JNU). “Such tariff barriers have made exports uneconomical, pushing these countries to reconsider their trade options within the RCEP framework."
Trump, meanwhile, imposed the highest 50% tariffs on India, including a 25% penalty for buying Russian oil. The first set of duties came into effect on 7 August, while another 25% is scheduled to come into force on 27 August.
“Since both China and India are among the largest markets in the region, it is essential that they work out a more workable arrangement to make effective use of the RCEP platform," said Dattesh Parulekar, assistant professor of International Relations at Goa University. “Without mutual understanding between the two, the benefits of such a mega trade pact will remain underutilised."
India’s earlier opposition was shaped by key concerns such as an unfavourable trade balance with China, fears that Chinese goods would flood Indian markets through third countries, and New Zealand’s plan to supply milk and milk products to India that would hurt India’s small farmers and dairy cooperatives, experts said.
“China had been using Cambodia, Laos, Vietnam, and other ASEAN nations as platforms to reroute exports into India under existing free trade arrangements, leading to charges of unfair trade practices," said Kondapalli. “Out of nearly 14,000 tariff lines offered to China under its trade pact with India, Beijing increasingly exploited indirect channels, which became a major sticking point for New Delhi."
In the present setup, India’s strongest export sectors, such as pharmaceuticals and IT services, face heavy restrictions in China and do not have market access there.
Amidst the thaw in India-China relations, a new study by Indian Council for Research on International Economic Relations (Icrier) has called for a recalibration of India’s trade strategy with Beijing, noting that the trade deficit touched a record $99.2 billion in FY25.
According to data from the ministry of commerce & industry, India’s imports from China increased from $94.57 billion in FY22 to $113.45 billion in FY25. In contrast, exports to China declined from $21.26 billion in FY22 to $14.25 billion in FY25.
In the current fiscal, inbound shipments from China during April-July stood at $40.66 billion, up 13.1% from a year earlier. Exports to China, too, jumped 20% to $5.76 billion during the same period.
While India’s FDI (foreign direct investment) inflows from China have been negligible at $886 million over the past decade, the Icrier study led by professor Nisha Taneja highlighted that India’s untapped export potential to China is as high as $161 billion —nearly 10 times the current exports.
Strikingly, 74% of this potential lies in medium and high-technology sectors, compared to the present export basket that is dominated by primary and resource-based goods, the report noted.
The study highlighted that the realisation of large additional export potential with China has been constrained by several tariff and non-tariff barriers (NTBs). To address market access barriers, it recommended that India and China set up a joint task force to resolve NTBs, and improve transparency through fair testing and WTO-compliant communication.
It further suggested diversifying the export base towards high-value products such as telephone sets, aircraft, turbojets, motor vehicle parts, and photo-semiconductor devices. On the import side, the report underscored that complete decoupling from China is unrealistic given its role in global value chains.
Instead, India should cut uncompetitive imports worth nearly $30 billion—mainly machinery, electronics, and chemicals—by sourcing from more competitive suppliers such as Vietnam, South Korea, and the UAE.
