Sixteen nations met recently at a trade summit in Bangkok, Thailand, hoping to iron out the terms of a regional trade deal covering nearly half the world’s population. Then India, after seven years of negotiations, decided to pull out.The Regional Comprehensive Economic Partnership (RCEP) included all 10 countries in the Association of Southeast Asian Nations as well six other partner countries: China, Japan, South Korea, Australia, New Zealand and India.

As India’s economy continues to slow, regional integration held the promise of a new source of growth. India now faces a stark choice – either strengthen domestic economic reforms or risk being left behind as trade migrates to lower-tariff trade zones throughout Asia.Real reforms will not be easy, despite Indian Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) winning national elections in May. The economy has not been the focus since Modi’s re-election. Instead, nationalistic and sectarian politics have defined the first six months of Modi’s new term and a strong coalition government has still not been formed.While political issues remain unresolved, India’s economy continues to slow. Growth fell to 7 per cent last year from a decade high of 8.5 per cent in 2010. While that is still among the fastest in the world, trend lines are not promising and this year does not look much better. Debt rating agency Moody’s has just downgraded its outlook on India to “negative” while maintaining a Baa2 bond rating. That is just two places above speculative, non-investment grade. Industrial production has fallen for two months running, to levels last seen in 2011.