India's observer status raises questions about its IPEF plans

A former Indian commerce secretary, under condition of anonymity, said India might have consciously decided to participate as an observer since it might not be ready for this agreement right now

India participated only as observer in the just-concluded Indo-Pacific Economic Framework (IPEF) chaired by US Trade Representative (USTR) Catherine Tai. Experts believe India may not be ready yet to fully commit itself to the ongoing discussions to finalise the contours of a trade deal among the 14 IPEF members, led by the US. 

New Delhi was represented by Additional Secretary in the Ministry of Commerce Rachna Shah as observer at the first virtual meeting of IPEF trade ministers on July 26.

While a joint statement was expected from the meeting, USTR only released a read-out after the meeting. 

“The ministers had positive and constructive discussions and reaffirmed their collective goal to pursue a high-standard and inclusive economic framework through ongoing and intensified engagements,” read the statement. 

In reply to a query by Business Standard, the spokesperson for the Ministry of Commerce said its minister Piyush Goyal only attended the ministerial meeting convened by US Secretary of Commerce Gina Marie Raimondo. 

“At the meeting convened by USTR, Goyal could not attend due to prior commitments related to the Group of Twenty high-level forum where he was one of the panellists. However, he held a discussion with USTR prior to the ministerial meeting,” he clarified.  

The spokesperson further added that discussions are on to determine the contours of the pillars. “India is closely engaging with other partner countries on this,” he said.

The IPEF has four pillars: Trade; supply chain; clean energy, decarbonisation, and infrastructure; and tax and anti-corruption.

Under trade, the IPEF seeks to build “high-standard, inclusive, free and fair trade commitments”. While the USTR is leading discussions on the trade pillar, the US commerce secretary is spearheading discussions on other three pillars.

A spokesperson from the US embassy said: “India’s position on IPEF is best addressed by the Indian government.” 

An email sent to USTR didn’t elicit any response till the time of going to press. 

A former Indian commerce secretary said India may have consciously decided to participate as observer since it may not be ready for this agreement right now.

“Had India formally participated in this meeting, it would have meant it agreed to the outcome of it. An observer status right now will allow India to remain on board without committing to the agreement,” he observed. 

Biswajit Dhar, professor of economics at Jawaharlal Nehru University, said India was on the back foot since it was increasingly clear that the US wanted a comprehensive trade deal under the trade pillar, which would be challenging for India. 

“India’s participation as observer in the discussions at the first meeting under the trade pillar of the IPEF sends a strong message. It means India didn’t participate in the discussions and is still weighing its options,” he added.

Prime Minister Narendra Modi formalised India’s entry into the IPEF in May on the sidelines of a Quad leaders’ summit in Tokyo to strengthen economic cooperation among Indo-Pacific nations as a strategic counter to China’s growing clout in the region.

Speaking at the launch event in Tokyo, Modi said India would work with other members to build an “inclusive and flexible” IPEF and talked about the supply-chain pillar without mentioning the other three pillars of the proposed trade deal.

A fact sheet released by the White House in May said it would pursue the high-standard rules of the road in the digital economy, including standards on cross-border data flows and data localisation, as well as labour and environment standards. 

India and the US have divergent views on these issues.