India is opting out of the Regional Comprehensive Economic Partnership (RCEP), the trading bloc that represents a region universally recognised as home to ‘the world’s most dynamic economies’. When it comes to fruition in 2020, the RCEP pact will represent just under 40% of the world’s GDP. While India has valid concerns for opting out, history has shown that no nation has achieved economic greatness by insulating itself from its neighbours. Look how estrangement beggared China after the Ming period, while engagement propelled Meiji Japan. Yet Prime Minister Modi says the decision to stay out of the RCEP is for India’s own good.

The national interest was being apparently undermined because the government believes the terms being offered to attract India to join the RCEP were lacking in fairness and would have led to the dumping of mostly cheap Chinese goods in the country. The resulting avalanche would have all but buried Modi’s flagship scheme ‘Make In India’. This legitimate and overwhelming fear is thought to have weighed heavily on the PM’s mind. The decision to ‘put India first’ and opt-out has been hailed by certain elements and lobbies that have had a vested interest in opposing the deal. They may be cheering now but they forget that it’s not the RCEP that needs India but it’s India that needs the RCEP or any other trading bloc for that matter. Indeed, the long-term cost of not joining the world’s largest trading bloc may far outweigh the short-term benefit of staying out.

While no one can deny that India is well within its rights to reject a deal that is not negotiated on its own terms, there is a feeling that the decision reflects an aversion within the government to shun necessary but politically tough reforms. This hesitation initially surfaced in Modi’s first term when the government vacillated on the road to reform after Rahul Gandhi ambushed the BJP with his infantile ‘suit-boot sarkar’ political barb.

This time the reticence is down to their disappointing results in the recently concluded Maharashtra and Haryana assembly elections. Suitably chastened, the BJP is divided over the road ahead. One faction is advocating economic populism and the other is linking the tepid electoral response to a desire for bolder reforms. While the BJP works to bridge the internal divide, experts are hoping it’s bosses come down in favour of the reformists. The Modi government, it appears, has forgotten that it possesses oodles of political capital. With 303 MPs in the Lok Sabha the government is today even better placed than Vajpayee’s NDA to withstand resistance to more unpopular reforms that will make India more competitive.

In 2001 India’s tardiness in opening itself up to markets was punished. Vajpayee’s NDA was forced to give up its quantitative restrictions on imports after New Delhi lost a case in the WTO. The setback sparked off fears that India would be submerged under a deluge of cheap imports. But the NDA turned a punishment into an opportunity by using it as an alibi to further liberalize the economy. The result was that India’s GDP grew by more than 8% after a long time.

The Prime Minister has announced that he would like to see India become a $5 trillion dollar economy by 2024. This can’t happen without boosting production, and thereby exports, exponentially. Boosting exports at least eight-fold has become especially crucial to achieving the target because domestic demand has flat-lined. The Surjit Bhalla panel has pointed out in its recently submitted report that ‘with a sluggish WTO and global economic slowdown, it is important to achieve trading frameworks for expansion of markets and scaling up production for competitive pricing.’’ It’s almost given that manufacturing competitively priced products in today’s age requires integration with global supply chains. By not joining the RCEP, an isolated and inward-looking India will not be able to get its export story in order. It will not be able to convince nations, looking to lessen their dependence on China, that India is truly open for business. If not the RCEP, India must look to partner others. Opting out is not an option.