MUMBAI • India should hold talks with the European Union for a free trade agreement (FTA), the government said yesterday, a day after it refused to join a regional trade pact led by the Association of South-east Asian Nations (Asean) for fear of a flood of cheap Chinese imports.
Trade Minister Piyush Goyal said sectors such as gems, textiles and agriculture have pushed for a trade pact with the EU. German Chancellor Angela Merkel has also called for talks to restart to finalise a pact.
"We should engage in an FTA with the EU," Mr Goyal told a news conference where he explained the reasons for not joining the Regional Comprehensive Economic Partnership (RCEP) that 15 nations concluded on Monday.
Mr Goyal said India had put forward "strong demands" on services and investments, leading to the prolonged negotiations for the RCEP.
India's decision was seen as a blow to the deal, which now includes all 10 Asean states plus China, Japan, South Korea, Australia and New Zealand, but not the United States. The remaining members aim to sign it next year, after reviewing an agreed draft text.
New Delhi's decision was hailed yesterday by Indian farmers and businesses, even as experts cautioned that India, which has a long history of protectionism, may lose out as it tries to become a more globally competitive economy.
India's 11th-hour rejection of the RCEP - which was meant to account for 30 per cent of global gross domestic product and loop in half the world's population - comes as the country faces slowing manufacturing and consumption.
The pact would have increased India's access to other Asian markets, but New Delhi feared its domestic industries would be hit hard if the country was flooded with cheap made-in-China goods, particularly in key employment sectors such as agriculture and textiles.
In a tweet on Monday, the country's largest dairy producer Amul thanked Prime Minister Narendra Modi for his "exemplary leadership and support" to dairy farmers, who would have been exposed to more competition under the RCEP.
"Your vision of supporting their livelihood will help in doubling their incomes and make India stronger," it said.
Mr Praveen Khandelwal, secretary-general of the leading lobby group Confederation of All India Traders, agreed, saying that the deal would have allowed Chinese manufacturers to overwhelm "the Indian market with Made In China products at very low prices... creating a disequilibrium".
Mr B.M. Singh, convenor of the All India Kisan Sangharsh Coordination Committee, said the rejection of the deal was "a huge victory for farmers".