There has been significant geopolitical churning in Asia—as in other parts of the world—in the aftermath of the tariffs imposed by US President Donald Trump. In the case of India, Trump has imposed an additional 25% tariff on India for the purchase of Russian oil—despite sanctions imposed by the US on Russia in the aftermath of the Russia-Ukraine war.
More recently, the Trump administration raised the H-1B Visa fees to $100,000—this decision is likely to impact both Indian Information Technology (IT) professionals and several Indian IT companies. An estimated 70% of H-1B visa recipients in 2024 were Indian nationals. Several Indian IT companies, including Tata Consultancy Services (TCS) and Infosys, have also benefitted significantly from the H-1B program.
Reset in India-China ties in recent months
A reset in India-China ties—impacted temporarily by China’s support for Pakistan during the India-Pakistan conflict in May 2025—was inevitable given the changing global economic and geopolitical situation. The Trump administration’s stance on issues, especially India’s purchase of Russian oil, recent announcements pertaining to the H-1B visa fee hike, and an overall unpredictability in his policies—as discussed earlier—has prompted India to reorient its ’s economic ties within Asia and beyond.
Apart from several high-level visits by senior Chinese officials to India, the Indian Prime Minister Narendra Modi also visited Tianjin, China, in connection with the Shanghai Cooperation Organisation–SCO Summit (August 31-September 1, 2025). This was Modi’s first visit to China since 2018.
During the talks with Indian PM Narendra Modi—on the sidelines of the SCO Summit—Chinese President Xi Jinping re-emphasized the need for better ties between both countries and underscored the point that in a changing global situation it is important for the ‘Dragon’ (China) and the ‘Elephant’ (India) to ‘come together.’
Narendra Modi highlighted the importance of India-China cooperation during his talks with Xi. In an interview with a Japanese daily—before his China visit—Modi said:
‘Given the current volatility in the world economy, it is also important for India and China, as two major economies, to work together to bring stability to the world economic order.’
Only recently, both countries agreed to resume direct flights. Flights between both countries will resume from October 26, 2025. This decision will benefit both businesses and give a significant fillip to people-to-people contact between both countries.
India-China and BRICS
India will hold the BRICS Presidency in 2026 and will need to work closely with Russia and China. While there are areas of differences between India and China on the issue of a common currency, India has been supporting trade in local currencies and has signed several agreements for the same with several BRICS members and other countries.
The New Development Bank (NDB) also plans to issue rupee-denominated bonds by March 2026.
Possibility of India joining RCEP
As a result of the reduction of tensions between India and China, there has been talk of a rethink in India vis-à-vis joining the Regional Comprehensive Economic Partnership (RCEP). The RCEP comprises 15 member countries, including all ASEAN member states like Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. Additionally, China, Japan, South Korea, Australia, and New Zealand are members of the bloc. According to estimates, the RCEP accounts for nearly 1/3rd of global GDP—32.6%—in — in 2025 and is home to over 2 billion people.
It would be pertinent to point out that India and ASEAN have a Free Trade Agreement (FTA), which came into effect in 2010. India also has FTAs with Japan and Australia, which came into effect in 2011 and 2022, respectively. Apart from Australia, several members of the RCEP, especially ASEAN nations, have strengthened strategic ties with India under the umbrella of the Indo-Pacific.
India had pulled out of the RCEP in 2019 due to concerns of Chinese goods flooding Indian markets. India’s trade deficit with RCEP countries was over $100 billion in 2019 (China accounted for over half of this trade deficit). In 2024-2025, India’s trade deficit with China was $99 billion. India’s trade with ASEAN countries was $123 billion in 2024-2025.
Several influential lobbies—especially in the agricultural and allied fields—had expressed their strong opposition to the RCEP. There were strong apprehensions that India’s dairy sector could get impacted by New Zealand and Australia’s plans to supply milk products.
Domestically, it was very tough to ignore the sections opposing the RCEP. While commenting on India pulling out of the RCEP, Narendra Modi said:
‘The present form of the RCEP Agreement … does not address satisfactorily India’s outstanding issues and concerns. In such a situation, it is not possible for India to join the RCEP Agreement’
Since 2020, India-China ties have gone downhill after the Galwan clashes. Economic ties had also been impacted, and India had imposed restrictions on Foreign Direct Investment (FDI) from China. In the aftermath of the thaw with China, it has decided to relax restrictions in certain sectors.
Several ASEAN countries with which India shares close relations had expressed their disappointment pertaining to India’s pulloutfrom RCEP.
There has been some support for India’s return to RCEP. Prominent economists and individuals in government have batted for India’s return to the RCEP and the CPTPP. One of the key factors for a rethink vis-à-vis the RCEP is the uncertainty and the major changes that have taken place in global supply chains due to the tariff wars.
In 2023, ASEAN Secretary-General Dr. Kao Kim Hourn said that ASEAN nations want India to join RCEP.
Apart from ASEAN, Japan has also been pushing for India’s entry into the RCEP.
While in a changing geopolitical and economic setting, nothing can be ruled out. Re-entering RCEP is not likely to be a simple task. First, the India-China trade imbalance persists. India’s Commerce Minister Piyush Goyal has flagged this point repeatedly and in 2024 categorically ruled out the possibility of India joining the RCEP.
Second, several important economic lobbies are likely to oppose India’s entry into the RCEP. This is even tougher, since Indian PM Narendra Modi has emphatically stated that his government will not provide market access to the US in the agriculture, dairy, and fisheries sectors.
Conclusion
In conclusion, despite the argument that, given the current global economic situation, a more pragmatic approach vis-à-vis the RCEP may be desirable. This is highly unlikely given the opposition of important lobbies within India as well as India’s massive trade deficit with China.
