India declines participation in the world's largest trade agreement, alleging China's trade practices to be 'very murky'.

• India's commerce and industry minister stated that it is not in the country's interest to join the Regional Comprehensive Economic Partnership, as he ruled out the idea of being part of a free trade agreement with China.
• Piyush Goyal stated that RCEP was not beneficial to our farmers, did not align with the aspirations of small and medium industries, and was essentially a free trade agreement with China.
• The RCEP is the largest free trade agreement globally in terms of the GDP of its member countries.

India's commerce minister declined to join the Regional Comprehensive Economic Partnership, the world's largest trade deal, stating that it is not in the country's best interest to enter into a free trade agreement with China.

India will not participate in the RCEP because it does not align with the founding principles of ASEAN and it is not in the country's best interest to enter into a free trade agreement with China, according to India's Minister of Commerce and Industry Piyush Goyal, who made this statement in an interview with CNBC's Tanvir Gill.

In 2020, 15 Asia-Pacific countries, comprising 30% of global GDP, signed the RCEP deal. This agreement came into effect in January 2022 and includes the 10 members of the Association of Southeast Asian Nations and their five largest trading partners: China, South Korea, Japan, Australia, and New Zealand.

The RCEP negotiations began in 2013 with India as a participant, but it withdrew from the agreement in 2019 due to unresolved "core interest" issues. At the time, India did not disclose the specific concerns that led to its withdrawal.

At that time, India had already established free trade agreements with ASEAN, Japan, and Korea, as well as a bilateral trade worth $300 million with New Zealand.

"Our small and micro medium industries and sector were not adequately represented in RCEP, and the agreement ultimately served only the interests of our farmers, with China being the primary beneficiary," he stated.

The minister stated that it is challenging to compete against a non-transparent economy when viewed from outside the country.

"No one back home would want an FTA with a non-transparent economy that is opaque in its economic practices, where both trading systems, political systems, and the way it is managed differ significantly from what the democratic world desires."

Goyal accused China of exploiting the World Trade Organization's policies to gain an advantage, by exporting low-quality goods at low prices and overwhelming other economies.

Recently, China has been producing more goods, including solar panels, cars, and steel, despite a slow economy, which has led to an increase in cheap exports to foreign markets.

Semiconductor ambitions

The minister argued strongly for India to become a "plus one" semiconductor country like Taiwan.

The "China Plus One" strategy involves companies diversifying their manufacturing and sourcing operations by continuing to operate in mainland China while also expanding into other countries. This approach aims to minimize risks associated with relying solely on a single country's market or supply chain.

Goyal believes that India could serve as an alternative location for companies seeking to diversify their operations beyond Taiwan in the semiconductor industry.

Goyal stated that the semiconductor industry is being encouraged in a significant manner. The ecosystem is being developed, which is crucial for the growth of foundries in the country.

"The demand for semiconductor products is expected to reach $100 billion by 2030 and will continue to grow exponentially, according to him. He also stated that India's semiconductor industry is gaining interest at an incredible pace."

India is actively seeking foreign companies to set up their operations in the country with the goal of becoming a major chips hub like the U.S., Taiwan, and South Korea.

This year, Prime Minister Narendra Modi launched three semiconductor plants, increasing the number of plants under development in India to four. One of these plants is a joint venture between Tata Electronics and Taiwan's Powerchip Semiconductor Manufacturing Corp. Located in Dholera, Gujarat state, the plant is expected to produce its first batch of semiconductors by late 2025 or early 2026.

Goyal stated that India's size, democracy, and rule of law make it a "safe haven" for Taiwan in the semiconductor space when asked if India could be Taiwan's "plus one" in this field.

He argued that it offers a compelling case for a society with a perpetually young population, high demand, and a strong rule of law.

Goyal stated that excessive focus on a single region carries significant risks, as recognized by the world.

The Indian chip industry has two primary objectives: attracting foreign businesses to set up operations and invest in the country, and forming alliances with major semiconductor nations, including the U.S. In 2021, the government introduced a $10 billion incentive program for the sector, which is open to both domestic and international companies.

In 2024, Taiwan is predicted to have approximately 44% of the global market share in chipmaking, with China and South Korea following closely behind with 28% and 12%, respectively. The U.S. and Japan are expected to have a smaller market share of 6% and 2%, respectively.

Taiwan's global capacity share in advanced manufacturing processes is predicted to decrease to 40% by 2027, while South Korea's could see a 2% decline. Meanwhile, China's capacity share is expected to increase by 3% to 31% in the same time period.