Indo-Pacific Economic Framework for Prosperity (IPEF)

 The term ‘Indo-Pacific’ started to be discussed in strategic circles about a decade ago, but has rapidly gained importance in recent years. The economic rise of India and the massive increase in maritime trade passing through the Indian Ocean have helped make the Indo-Pacific a geopolitical and geoeconomic construct. Currently, the Indo-Pacific is the most contested maritime zone in the world because of the growing strategic rivalry between the US and China and the security interests of other key players in the region

Recently India agreed to be a part of the Indo-Pacific Economic Framework for Prosperity (IPEF), a U.S.-led economic grouping comprising 12 countries.These include Australia, Brunei, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam. Together, these countries account for 40 per cent of the global GDP.  

Why has India chosen to join this after walking out of RCEP?

The main reason for India to walk out of RCEP, which is now the largest regional trading bloc globally, was its concern that the pact would allow China to flood the country’s market with cheap products at preferential import duties, leaving domestic producers uncompetitive. The IPEF, with a membership accounting for about 40 per cent of the global GDP, is providing India another opportunity to be part of a mega economic arrangement, but outside the influence of China

The economic framework broadly rests on four pillars: trade, supply chain resilience, clean energy and decarbonisation, and taxes and anti-corruption measures. 

Trade ,

• On the trade front, the endeavour is to establish “high-standard, inclusive, free, and fair-trade commitments” to fuel economic activity and investments benefitting both workers and consumers
• Digital trade incorporates not just the purchase and sale of goods online but also data flows that enable the operation of global value chains and services, like smart manufacturing, platforms and applications. The idea here is to overcome downstream costs for businesses as well as upscale the ability to utilise data processing and analysis, and enhance cybersecurity outside their geographies.  

Supply Chain Resilience :

• As for supply chain resilience, the framework aspires to secure access to key raw and processed materials, semiconductors, critical minerals and clean energy tech, particularly for crisis response measures and ensuring business continuity. 

Clean energy, decarbonisation and infrastructure :

 the clean energy, decarbonisation and infrastructure pillar would provide technical assistance and help mobilise finance, including concessional finance, to improve competitiveness and enhance connectivity by supporting countries in the development of sustainable and durable infrastructure for adopting renewable energy.

Tax and anti-corruption:

tax and anti-corruption is aimed at promoting fair competition by enforcing robust tax, anti-money laundering and anti-bribery regimes in line with existing multilateral obligations, standards and agreements to curb tax evasion and corruption in the region.

How India Benefited for  Indo-Pacific Economic Framework for Prosperity (IPEF)?

• India is committed to a free, open, and inclusive Indo-Pacific region and believes that deepening economic engagement among partners is crucial for continued growth, peace, and prosperity.
• India is keen to collaborate with partner countries under the IPEF and work towards advancing regional economic connectivity, integration and boosting trade and investment within the region.
• India (Lothal, the world’s oldest commercial port) has been a major centre in the trade flows of the Indo-Pacific region for centuries.
• India’s main concern is on the issue of data localization for which a Bill that envisages a framework for localising Indian data and the establishment of a Data Protection Authority has been introduced.

Concerns:

1.For India, a major point of worry is that the stated objectives of the arrangement include pursuing high-standard rules in digital economy, such as standards on cross-border data flows and data localisation. This is something India has been avoiding in all its free trade deals as it does not want to lose sovereignty over its data.

2.The IPEF also wants to frame rules on labour standards, environment norms and decarbonisation, which India has never been keen on, including in its free trade pacts.