India is rethinking its decision to stay out of the world’s largest free trade bloc as it scrambles to cushion the blow from steep new tariffs imposed by US President Donald Trump.
Officials in New Delhi confirmed that discussions have begun on whether India should return to the Regional Comprehensive Economic Partnership (RCEP), which it exited in 2019 over concerns about trade deficits and risks to farmers and small manufacturers.
The rethink comes amid a worsening trade spat with Washington. US tariffs of up to 50 per cent are being levied on Indian exports in response to New Delhi’s increased purchases of Russian oil. A 25 per cent duty has already come into force, while the remainder is due to take effect on August 27. With bilateral trade worth more than $190 billion at risk, Indian policymakers are exploring alternatives to secure market access and diversify export destinations.
Two senior government officials told local media that RCEP has re-emerged as a serious option. “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,” one official said. The Ministry of External Affairs has asked the Research and Information System for Developing Countries (RIS), a government think tank, to assess the potential impact of rejoining the bloc.
RCEP, which groups 15 Asia-Pacific economies, covers 32.6 per cent of global GDP and represents a market of over 2.3 billion people. Its members include all ten Asean nations along with China, Japan, South Korea, Australia, and New Zealand. When the pact was finalised in 2020, India stood aside, citing fears of a flood of cheap imports from China, threats to its dairy sector from New Zealand, and an inability to secure fair market access for Indian goods and services. However, Japan and Singapore ensured that a special clause was included in the agreement, allowing India to return at any time.
For New Delhi, the calculus has shifted. Exporters in sectors such as pharmaceuticals, textiles, and engineering goods are lobbying for greater access to East Asian markets to offset declining competitiveness in the US. At the same time, India’s flagship IT and services exports still face heavy restrictions in China, leaving a gap that only deeper engagement in RCEP could fill. “The idea at this point of time is largely in terms of the opportunities that an FTA can create,” said Sachin Chaturvedi, director-general of RIS. “Trade compatibility, tariff structures, and new momentum in India-China relations must all be factored in.”
Still, the challenges are formidable. One of India’s earlier objections was that Chinese exporters were using third countries such as Vietnam, Cambodia, and Laos to reroute goods into India, worsening its trade deficit. “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,” noted JNU professor Srikanth Kondapalli. Any return would likely require New Delhi to secure written assurances from both China and Asean partners that India’s exports will enjoy reciprocal access.
Meanwhile, the tariffs imposed by the US have sharpened the urgency. Foreign Minister Subrahmanyam Jaishankar told a business forum in New Delhi that while negotiations with Washington continue, “there are redlines in the negotiations, to be maintained and defended,” particularly concerning India’s farmers and small producers. He described Trump’s policy announcements as “unusual” and said they highlighted Washington’s double standards. “If the argument is oil, then there are bigger buyers than us. If the argument is who is trading more with Russia, then Europe’s trade is far larger than India’s,” he said.
A planned US delegation visit to New Delhi later this month has been cancelled, dashing hopes of easing tensions. Analysts warn that the economic impact could be significant. According to Capital Economics, if the full tariffs are enforced, India’s GDP growth could fall by 0.8 percentage points this year and next. “The longer-term harm could be even greater as high tariffs could puncture India’s appeal as a global manufacturing hub,” the firm cautioned.
For now, the prospect of rejoining RCEP is still at the exploratory stage. Officials stress that India would only return if safeguards for sensitive sectors are guaranteed and greater market access is assured. But with global supply chains realigning, and the US proving an unreliable trade partner, pressure is mounting on New Delhi to hedge its bets.
India’s decision will carry profound geopolitical implications. A return to RCEP would deepen economic integration with East Asia, provide a counterweight to US pressure, and potentially reset its fraught trade relationship with China. For Indian exporters staring at a new wall of US tariffs, the choice may ultimately come down to pragmatism: either cling to redlines that preserve domestic sensitivities or take the gamble of plugging back into the world’s most powerful trade network.
