Indian flag and Chinese flag are displayed on the screen.
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India’s commerce minister has rejected the idea of joining the Regional Comprehensive Economic Partnership (RCEP), the world’s largest trade deal, saying it was not in the country’s interest to enter into a free trade agreement with China.
“India will not join RCEP because it does not reflect the guiding principles on which ASEAN was founded, and it is also not in the country’s interest to sign a free trade agreement with China,” Indian Commerce and Industry Minister Piyush Goyal told CNBC’s Tanvir Gill.
The RCEP Agreement used to be signed in 2020 by 15 Asia-Pacific countries — accounting for 30% of global GDP — and coming into effect in January 2022. These countries include the 10 members of the Association of Southeast Asian Nations and their five largest trading partners: China, South Korea, Japan, Australia and New Zealand.
Negotiations for RCEP began in 2013. and initially included India, which some members saw as a counterweight to China. However, in 2019, India opted out of RCEP, citing unresolved “core interest” issues. At that time, India has not expanded on what those unresolved core interests are..
Goyal noted that at that time, India already had free trade agreements with ASEAN, Japan and South Korea, as well as a $300 million bilateral trade deal with New Zealand.
“This is not in the interest of our farmers, RCEP does not reflect the aspirations of our micro, small and medium-sized industries and sectors and in some form it is nothing more than a free trade agreement with China,” he said.
“When you look at it from outside the country, you don’t realize how difficult it is to compete with an opaque economy,” the minister continued, referring to China.
“Certainly no one at home wants an FTA with [a] “The economy is not transparent, very opaque in its economic activities, in which the whole trading system, the political system, the economy — the way it is managed — is completely different from what the democratic world wants.”
Goyal also accused China of exploiting World Trade Organization policies to its advantage, flooding many economies with cheap goods that often fail to meet quality standards.
From solar panels to cars to steel, China has recently been producing more goods in a slowing economy, leading to a surge in cheap exports to foreign markets.
Semiconductor ambition
The minister also made a strong argument for India to become Taiwan’s “plus one” semiconductor nation.
“China plus one” is a term used to describe a supply chain strategy in which companies diversify their production and sourcing by continuing to operate in mainland China while also expanding into other countries. This approach is intended to mitigate the risks associated with being completely dependent on a single country’s market or supply chain.
Building on that idea, Goyal believes that India could become an alternative regional location for companies looking to diversify their semiconductor business beyond Taiwan.
“We are encouraging [the] semiconductor industry in a big way. We have started building the ecosystem, which is very necessary before we can see more and more foundries coming to this country for actual chip manufacturing,” Goyal said.
“We expect the demand for semiconductor products to reach around $100 billion by 2030 and will grow exponentially thereafter,” he said, adding that interest in India’s semiconductor industry is growing “by leaps and bounds”.
India aims to become a major chip manufacturing hub Similar to the United States, Taiwan and South Korea are actively looking for foreign companies to set up operations in the country.
Earlier this year, Prime Minister Narendra Modi inauguration of three semiconductor factoriesbringing the total number of factories under development in India to four. One of the factories is a joint venture between Tata Electronics and Taiwan’s Powerchip Semiconductor Manufacturing Corp. The factory, set up in Dholera, Gujarat, is expected to deliver the first batch of semiconductors in late 2025 or early 2026.
Asked if India could be a “partner” to Taiwan in the semiconductor sector, Goyal said his country’s size, democracy and rule of law meant it was a “safe haven”.
“It provides an alternative where you will always have a young population, a lot of demand and you will have laws to protect it. I think that is a very compelling case,” he said.
Goyal added that the world recognises that over-focusing on any one area carries serious risks.
India’s chip strategy has two main components: attracting foreign companies to set up operations and invest in the country, as well as forming partnerships with other major semiconductor countries, such as the United States. In 2021, The government has approved a $10 billion stimulus program. For this industry, this may also apply to foreign companies.
By 2024, Taiwan will be the world’s chip manufacturing powerhouse.expected to hold about 44% of the global market sharefollowed by China with 28% and South Korea with 12%, according to a report. The United States and Japan accounted for 6% and 2%, respectively.
The authors of the report, Trendforce Taiwan Consulting CompanyTaiwan’s share of global capacity in advanced manufacturing processes is expected to fall to 40% by 2027, while South Korea’s could fall by 2%. China’s is expected to rise from 3% to 31% over the same period, the report said.
