<![CDATA[China, Gandhi or RSS? The real reason India snubbed RCEP trade pact]>

After all, even something touted as "the world's largest free-trade deal" starts to lose a bit of pizazz after 28 rounds and seven years of talks.

Enter Narendra Modi, India's prime minister and a man seen by supporters and detractors alike as the ultimate showman-politician.

In a move few had expected, he announced at a summit of 16 countries involved in the deal " known as the RCEP " that India would not be signing up after all.

It was like a bubble of hype had suddenly burst. Had all gone to plan, with the involvement of both China and India, the RCEP would have covered nearly half of the world's population and around 40 per cent of its GDP. Yet, stripped of the world's second-most populous nation, the hubris lay bare for all to see.

Indian Prime Minister Narendra Modi and his Japanese counterpart Shinzo Abe at the RCEP summit. Photo: Kyodo alt=Indian Prime Minister Narendra Modi and his Japanese counterpart Shinzo Abe at the RCEP summit. Photo: Kyodo

It was not meant to be this way. While India has long been a holdout in the negotiations, the 10-nation Association of Southeast Asian Nations (Asean) bloc that conceptualised the pact in 2012 had hoped Modi was about to reveal a breakthrough in eleventh-hour talks to seal the deal.

The expectation was that New Delhi would at least say it was on the same page as the other 15 countries in wanting to bring talks to a "substantial conclusion". That was supposed to have happened this time last year, but was pushed back a year to accommodate general elections in Australia, Thailand, Indonesia, and India.

Clearly, the Indian prime minister had different plans.

In the closed-door summit where he revealed his decision, Modi's comments underlined his political nous. He crafted a message that was not only meant to placate the frustration of the other 15 leaders, but also indulged in political haymaking for his domestic audience.

The prime minister chose not to reference the nightmarish scenes the RCEP's domestic critics had painted: of small businesses going bankrupt because of a flood of cheap mass-produced Chinese products, and of millions of dairy farmers going hungry because consumers' heads would be turned by milk products from New Zealand and Australia.

Instead, he invoked the country's most edifying symbol " Mahatma Gandhi.

Modi said neither "Gandhi's Talisman" " the late independence leader's exhortation that, when in doubt, decisions should be made with the interests of the weakest and poorest in mind " nor his own conscience allowed him to join the RCEP.

Schoolchildren dressed as Indian independence icon Mahatma Gandhi throw flowers at his portrait to celebrate his 150th birth anniversary in Amritsar. Photo: AFP alt=Schoolchildren dressed as Indian independence icon Mahatma Gandhi throw flowers at his portrait to celebrate his 150th birth anniversary in Amritsar. Photo: AFP

The government said later in a public statement that it had engaged in the talks in good faith, but had no choice but to pull out as it had not secured the assurances it asked for.

Among its demands were for stronger wording on rules of origin, for the base year for the reduction of duties to be 2019 instead of 2014, and for companies investing in India to procure a certain percentage of input materials locally.

Appearing to hold out an olive branch, Piyush Goyal, the Indian trade minister, said New Delhi's future accession to the RCEP was still possible because as with all "international engagement and relations", the doors should "never be shut with anybody".

But among Asean members, the mood was grim. A trade ministry official from one mid-sized country told This Week in Asia it felt it had been "taken for a ride, big time", having witnessed New Delhi's negotiators extract many concessions, only to drop out of the pact at the last minute.

Until the day before Modi's announcement, India had given no indication it was about to take such a drastic step.

Negotiators from three Asean countries told This Week in Asia they were particularly frustrated because Indian officials had made fresh demands only last week, just as the other countries were working furiously to sew up loose ends. India, though, denies this account of events.

Still, at least in public, the bloc is saying India's options are open.

While the 15 countries " Asean plus China, Japan, South Korea, New Zealand and Australia " had concluded "text-based negotiations", they acknowledged in a joint statement that they would continue working with India on outstanding issues.

China, the biggest of the 16 economies, pledged to work with New Delhi to find a way forward.

Mohan Bhagwat, the leader of India's Hindu nationalist organisation Rashtriya Swayamsevak Sangh (RSS). Photo: Reuters alt=Mohan Bhagwat, the leader of India's Hindu nationalist organisation Rashtriya Swayamsevak Sangh (RSS). Photo: Reuters

Within the Indian commentariat, conversations have revolved around the merits of Modi's sudden U-turn, the manner it was made, and whether "the talisman" of Gandhi was indeed the decisive factor.

MK Venu, a veteran political journalist, wrote that the invocation of Gandhi might have been an attempt to "hide deep structural weaknesses plaguing the economy".

One common theory was that the heavy friendly fire the government was taking for pressing ahead with the RCEP had become too much to bear for Modi.

Click to enlarge. alt=Click to enlarge.

The trade pact's most strident opponents came from within Modi's Hindu nationalist ranks.

The Swadeshi Jagran Manch (SJM), the economic wing of the Rashtriya Swayamsevak Sangh (RSS) " the ideological parent of Modi's ruling party " last month staged a nationwide protest against the trade pact.

Following Monday's developments, the group and its leaders, including the economics professor Ashwani Mahajan, have received acclaim from pro-government supporters for the campaign. Deepak Sharma, the SJM's spokesman, said Modi's decision was "an acknowledgement of the interests of all Indians".

Supporters of Modi's Bharatiya Janata Party at an election campaign rally in Kolkata. Photo: AP alt=Supporters of Modi's Bharatiya Janata Party at an election campaign rally in Kolkata. Photo: AP

Along with Modi's Bharatiya Janata Party (BJP), the SJM and RSS are among the groups that form the Sangh Parivar " an umbrella term for the nation's Hindu nationalist organisations.

Nilanjan Mukhopadhyay, an author of books on Modi and the Hindu nationalists, said the lobbying efforts by the Sangh affiliates played an important role in the prime minister's decision.

The New Delhi-based commentator said the decision should be seen in the context of prevailing political circumstances in India: the BJP's failure to register big wins in two state elections last month, and rising anxiety about the state of the economy.

Modi won a resounding general election victory this year, but citizens were anxious "because they don't have money in their hands", he said.

Compounding the problems were the lobbying by the Sangh Parivar and a last-minute salvo from the opposition party that created the impression Modi was "compromising on the Indian farmer and the Indian consumer". That situation, coupled with the long-standing belief among Indians that "reforms are anti-poor and pro-rich", left Modi in a tight spot when it came to the RCEP, Mukhopadhyay said.

Other analysts said the U-turn was just the latest example of the growing clout of the SJM and other Sangh Parivar affiliates.

Chinese President Xi Jinping meets Indian Prime Minister Narendra Modi in Mamallapuram last month for informal summit talks. Photo: DPA alt=Chinese President Xi Jinping meets Indian Prime Minister Narendra Modi in Mamallapuram last month for informal summit talks. Photo: DPA

The BJP denies this will happen.

In an interview, the party's national spokesman for economic affairs Gopal Krishna Agarwal said in the end what was on offer to India in the RCEP was simply not good enough.

"Our politics is right centre. We believe in the market economy and the open economy," Agarwal said. That, however, did not mean India should not protect its economy from the predatory practices of others, he said.

Agarwal said the question of trade imbalances with China could not be avoided.

Two-way trade between the two Asian superpowers stood at US$95.5 billion last year but India had a deficit of US$53 billion " the biggest the South Asian economy has with any country.

India's total trade deficit with the other RCEP countries, including the Asean bloc with which it has an FTA, stands at some US$105 billion.

It ships about 20 per cent of all its exports to the 15 countries, and around 35 per cent of its imports are from these economies.

"We feel China can be doing more to think about what it can import from India. This deficit has to be addressed. China can do more to help us deal with this large deficit situation," Agarwal said.

Mukhopadhyay, the Modi biographer, said intrigue in the region about the prime minister's RCEP U-turn should not translate into "alarmism".

This article originally appeared on the South China Morning Post (SCMP).

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