Rakesh Mohan, a key member of the Economic Advisory Council to the Prime Minister (EAC-PM), has urged India to dramatically reduce import tariffs to align with ASEAN levels, warning that failure to integrate into global trade blocs could isolate the country economically. In an exclusive interview with PTI Videos, Mohan emphasized the need for India to join major regional trade agreements like the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to stay competitive in a rapidly fragmenting global trade system.

Mohan highlighted that the World Trade Organization’s declining influence has given rise to powerful regional blocs, including the European Union, the USMCA in North America, RCEP, and CPTPP. “There’s room for reducing our tariffs to ASEAN levels, which would boost our competitiveness,” he said, noting that India’s tariff reductions stalled after 2012 and even increased post-2017. He recalled that the successful economic reforms of the 1990s, which included tariff cuts, were supported by a strategic devaluation of the rupee to protect industries. “As we lower tariffs to join global supply chains, the exchange rate must adjust to favor exporters and manufacturing,” Mohan added.

India withdrew from RCEP negotiations in 2019, citing concerns over trade deficits and market access, particularly with China. The RCEP includes ASEAN nations (Brunei, Cambodia, Indonesia, Malaysia, Myanmar, Singapore, Thailand, the Philippines, Laos, Vietnam) and partners like China, Japan, South Korea, Australia, and New Zealand. Mohan suggested India reconsider joining RCEP with safeguards and apply for CPTPP membership to secure its place in global trade.

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On Chinese investment, Mohan advocated easing restrictions, noting China’s rising per capita income makes it an ideal partner for labor-intensive industries. “Indian entrepreneurs should pursue joint ventures with Chinese investors to bring industries here,” he said, pointing out that China’s $2.4 trillion import market remains largely untapped by India. He urged the government to analyze China’s import needs and incentivize industries to target this market.

Since April 2020, FDI from China has required government approval due to strained India-China relations following the 2020 Galwan Valley clash. Despite this, the 2024 Economic Survey pushed for Chinese FDI to boost manufacturing and exports. China accounts for just 0.34% ($2.5 billion) of India’s FDI inflows from April 2000 to March 2025.

Addressing the impact of recent U.S. tariffs—a 25% base tariff imposed on August 7, 2025, plus an additional 25% penalty for India’s purchase of Russian crude oil and military equipment—Mohan acknowledged a potential GDP hit but suggested it would be manageable. “The fiscal impact may not be severe, but we must support affected exporters and regions with targeted fiscal measures,” he said.

Mohan’s remarks underscore the urgency for India to adapt to a shifting global trade landscape, balancing tariff reductions with strategic economic policies to enhance competitiveness and secure a foothold in major trade blocs.

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