India needs to step up competitiveness in 24 identified product categories to capture this market in these RCEP countries
India may have withdrawn from the proposed 16-country mega-regional trade agreement of Regional Comprehensive Economic Partnership (RCEP) in the wake of the concerns raised by the domestic industry; However, there is huge untapped market potential for Indian exporters in these countries.
Indian industry can benefit from USD 125.59 billion market potential, especially in sectors such as metals, textile and marine products, in 10 of these RCEP countries, an analysis by MVIRDC World Trade Center Mumbai based on the latest database of the UN Comtrade shows. UN Comtrade is the repository of international trade statistics of the United Nations. India is among the top 15 exporters of these 24 product categories in the global market. These product categories have strong import demand in China, South Korea, Australia, Japan, Indonesia, Philippines, Malaysia, Thailand, Cambodia and Vietnam.
For instance, India is the seventh leading exporter of aluminum products in the world and yet it is not a major supplier of these products to RCEP countries except to South Korea. In 2018, Japan, Thailand, South Korea and China together imported USD 18.65 billion worth of aluminium products, while India supplied hardly USD 700 million worth of these products to these countries (data from Ministry of Commerce, Government of India shows).
India is the sixth largest exporter of man-made fabrics and its major export destinations are USA, Turkey, Brazil, Bangladesh and UAE. India can explore USD 10.24 billion import demand for man-made fabrics in Vietnam, Indonesia, China and Cambodia. Similarly, India, which is the second largest exporter of textile yarn, can benefit by meeting the USD 13.57 billion annual import demand in China, South Korea, Japan and Vietnam. On the other hand, India’s fourth position in world exports of bovine meat products can help it grab the USD 10.96 billion import demand for these products in select RCEP countries. Major importers of these 24 product categories in the proposed RCEP bloc are given in the following table, along with their annual import, India’s annual exports to the world and its global ranking.
Sharing her thoughts on this market opportunity, Ms. Rupa Naik, Senior Director, MVIRDC World Trade Center Mumbai said, “We need to tap this import demand to bridge our trade deficit with these major RCEP countries. In order to realize this export potential, we need to create awareness about this among our SMEs and handhold them on meeting the quality standards in these markets. We can also exchange trade delegations and organise buyer-seller meetings in these identified products to understand the demand, product specifications and quality requirements of importers in these countries.”
The 15 RCEP countries together accounted for 57% or USD 105 billion of India’s overall trade deficit in 2018-19, with China itself contributing to USD 54 billion of this deficit.
Even though India is an exporter of these product groups, it will face tremendous competition from other Asian exporters on two major fronts, viz. cost and preferential market access. For instance, in order to realize market opportunity in textile yarn and man-made fabrics, India has to prove its competitive advantage over other competitors such as China, South Korea, Vietnam and Indonesia that are the other leading exporters of these goods. It will be even more challenging for India to export to RCEP countries once this proposed mega trade agreement is ratified and signed by all the member countries. For instance, in the case of man-made fabrics, leading exporters such as South Korea and China will have preferential market access to top importers such as Vietnam and Indonesia once the RCEP pact comes into force. India, which is the second largest exporter of organic colours will have to compete with China and South Korea that will have preferential market access to importers such as Japan and Indonesia.
Therefore, Government of India, together with World Trade Centers and state governments must come together to devise a strategic action plan to promote India’s global competitiveness in these identified products. The proposed Foreign Trade Policy for the next five years, which may be announced in the coming months, should have strategy to realize export potential in these products. Further, the government must extract special market access for Indian exporters of these goods while renegotiating its trade agreements with ASEAN, Japan and South Korea.