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Indo-Pacific Economic Framework for Prosperity (IPEF)
Context:
India formally signed agreements under the US-led Indo-Pacific Economic Framework for Prosperity (IPEF), focusing on establishing a clean and fair economy.
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- The agreements aim to improve the development, accessibility, and deployment of clean energy and climate-friendly technologies among member countries.
- They also focus on strengthening anti-corruption measures and promoting tax transparency.
- The Indian Ministry of Commerce and Industry highlighted that these initiatives will enhance energy security, reduce greenhouse gas emissions, and encourage innovation to decrease reliance on fossil fuels.
Funding Initiatives
- The IPEF Catalytic Capital Fund, supported by Australia, Japan, Korea, and the US, has an initial grant of $33 million to stimulate private investments totalling $3.3 billion.
- The PGI Investment Accelerator has received $300 million in initial funding from the US International Development Finance Corporation.
About IPEF:
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- Launched by the USA in 2022, the IPEF consists of 14 member countries aimed at enhancing economic competitiveness.
- The members of IPEF include Australia, Brunei, Fiji, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, the US, and Vietnam.
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The framework is structured around four key pillars:
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- Pillar I: Trade
- Pillar II: Supply Chain Resilience
- Pillar III: Clean Economy
- Pillar IV: Fair Economy
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Purpose of the Overarching Agreement:
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- Establishes a ministerial-level oversight mechanism to facilitate the effective implementation of Pillars II, III, and IV.
- It aims to enhance India’s productive capacity, integration into global supply chains, and promote innovation, aligning with India’s self-reliance goals.
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Administrative Framework:
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- The agreement provides a high-level political oversight framework, setting general guidance and goals for IPEF.
- It aims to create a formal mechanism for ministerial discussions on emerging issues, ensuring the group’s identity and longevity.
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Importance of IPEF for India
Economic Growth and Opportunities
- Access to New Markets: This is particularly relevant as India seeks to diversify its trade partnerships beyond traditional allies and reduce reliance on China.
- Investment in Infrastructure: Indian businesses have opportunities to attract foreign investments, especially in sectors like renewable energy and digital technology, which are crucial for India’s growth trajectory.
Strategic Positioning
- Countering China’s Influence: The IPEF is perceived as a strategic counterbalance to China’s economic dominance in the region.
- Enhanced Security Cooperation: The Quad alliance (comprising the U.S., Japan, Australia, and India) aligns closely with the objectives of the IPEF.
Digital Economy and Technological Advancement
- Focus on Digital Trade: The IPEF aims to establish rules governing digital trade, which is vital for India’s burgeoning tech sector.
- Sustainability Goals: The emphasis on clean economy initiatives aligns with India’s commitments to sustainable development and climate action.
Challenges and Considerations
- Lack of Direct Trade Incentives: Unlike traditional free trade agreements (FTAs), the IPEF does not promise market access or tariff reductions.
- E-commerce Regulations: India has historically been cautious about multilateral agreements on e-commerce due to concerns over data localisation and digital sovereignty.
