IPEF & India

Indo Pacific Economic Framework for Prosperity (IPEF)

  • Launched: In May 2022 by the US with 13 other countries—Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam.
  • Significance: These countries represent about 40% of global GDP and 28% of world trade.
  • Aim: To counter China’s rising influence in the region
  • Pillars: IPEF negotiations include four major pillars: 
    1. Trade
    2. Supply Chains
    3. Clean Energy
    4. Clean Economy (by rooting out corruption) 
  • Uniqueness: Unlike most other such international agreement frameworks, the IPEF offers in-built flexibility. Its member countries are not required to join all its four pillars and can opt to join any pillar/s of their choice.
  • India had joined Pillars II to IV of IPEF while it has an observer status in Pillar I. 

Why is the IPEF Agreement important for India?

  • For Supply Chain Stability: It is a major cause of concern for global trade, especially for fast-rising economies like India. 
    • Various conflicts are rising across the world, from Ukraine-Russia and US-China-Taiwan to Israel-Palestine and many more in the Middle-East. 
  • Earlier Example: India’s non-alignment on the Ukraine-Russia war let it import petroleum from Russia at discounted prices, saving billions of dollars, despite Western displeasure, while maintaining harmonious relations with the West.

Supply Chain Resilience: It is the ability to respond quickly to operational disruptions through flexible contingency planning and forecasting – from material sourcing to logistics and the final delivery of products and services.

Why is the Indo Pacific Economic Framework for Prosperity Group significant for India?

  • Economic Growth: It should help the country leverage its growing economic strength to participate in Global Value Chain (GVC) networks.
  • Strengthen Position: It is expected to strengthen India’s position as a reliable partner in the creation of resilient supply chains and help mitigate disruption risks at times of crisis.
  • Diplomatic Opportunity: During India’s G20 Presidency, a consensus forged with warring nations on the same platform gave India a significant role in world diplomacy. 
  • India Middle-East Europe Economic Corridor (IMEC): Another outcome of India’s G20 presidency was the IMEC, if brought to accomplishment, can bolster trade links between Asia and Europe via West Asia.

What challenges does the Indo Pacific Economic Framework for Prosperity Group face?

  • Trade Pillar in IPEF: Concern over traditional trade deals, as it does not offer enhanced market access. 
  • US Trade Policy Dynamics: The US provides trade subsidies to promote domestic production and also erects innovative trade barriers in the name of quality, labor, the environment, transparency, and other novel issues.
    • Example: The former US president Donald Trump had scrapped the Trans-Pacific Partnership (TPP), on the charge that it ignored the interests of US workers. 
  • Owing to conflicts and divergences of interest, IPEF members failed to reach a consensus on the trade pillar, and its adoption was deferred.

India has done well to publicize its capacity for innovation, especially in technology, and readiness to take on big challenges. With the joining of Indo Pacific Economic Framework for Prosperity Group, India needs to ensure that its participation aligns with its economic priorities, while also contributing to the overall objectives of the framework.



POSTED ON 08-11-2023 BY ADMIN
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