Strengthening India’s global economic might through a cautious geo-economic strategy

(MainsGS2:Bilateral, Regional and Global Groupings and Agreements involving India and/or affecting India’s interests.)

Context:

Regardless of provocations and causes, however justifiable they may seem to be, violence and consequent loss of human lives are deeply regrettable and avoidable.
As Mahatma Gandhi’s nation, India must be a committed and relentless apostle of peace and non-violence, both at home and in the world.

Era of peace and prosperity:

Ever since the fall of the Berlin Wall in 1989, a paradigm of free societies, frictionless borders and open economies evolved to be the governing order in many nations.
This catalysed freer movement of people, goods, services and capital across the world, further, global trade and per capita GDP nearly doubled in this period, marking an era of general peace and prosperity.
Societies and economies in the world became intertwined closely in the pursuit of shared global prosperity and such tight inter-dependence among nations will lead to fewer conflicts and promote peace, was the established wisdom.

Mutually harmful:

If inter-connectedness and trade among nations were mutually beneficial, then it follows that its disruption and blockade will be mutually harmful.
Retaliatory economic sanctions imposed on Russia have hurt all nations, albeit some more than the others.
Egyptians are reeling from food shortages due to their dependence on Russian and Ukrainian wheat, Germans suffer from high costs of heating in winter due to their dependence on Russian gas.
Moreover, Americans face a shortage of electric cars due to unavailability of car batteries that are dependent on Russian nickel, Sri Lankans have taken to the streets on economic woes and Indian farmers run the risk of high fertilizer prices triggered by a global shortage.

Global Village:

‘Global Village’ is not just an academic term but a lived reality for the nearly eight billion people on the planet.
This ‘Global Village’ was built on the foundation of advanced transportation networks, cemented with the U.S. dollar as the reserve currency and fenced by integrated payment systems.
Any disruption to this delicate balance runs the risk of plunging the ‘Global Village’ into disequilibrium and derailing the lives of all.
India too has benefited enormously from being an active participant in this interconnected world, with a tripling of trade (as share of GDP) in the last three decades and providing vast numbers of jobs.
Trade with other nations should and will always be an integral cornerstone of India’s economic future.

Global geo-economic conflict:

The Russia-Ukraine conflict is a global geo-economic conflict that threatens to hark back to the Cold War era of two dominant power blocs.
Nations that did not condemn the Russian aggression in the United Nations constitute more than half the world’s population but a quarter of the world economy versus nations that condemned Russia, account for three-quarters of the global economy.
The former, the Russia-China bloc, are large producers with rising consuming power while the latter, the western bloc, are today’s large consumers.
Thus, any new curtain that descends between these two blocs and divides them will cause major upheavals to the entwined global economic equilibrium.

A trade opportunity:

During the Cold War, when India pursued a prudent foreign policy of non-alignment, trade was a small part of India’s economy but now, trade represents a significant share of India’s GDP.
India’s trade is dependent on both these power blocs and on the current global economic structures of free trade, established reserve currency and transaction systems.
As the western bloc of nations looks to reduce dependence on the Russia-China bloc of nations, it presents newer avenues for India to expand trade.

Enormous gains:

The western bloc of nations has expressed its desire to embrace a new paradigm of ‘free but principled trade’ that values both morals and money.
While one may reasonably quibble about this new doctrine, India, as the largest peace-loving democracy, stands to gain enormously from this ‘principled trade’ aspiration of the western bloc.
It presents a tremendous opportunity for India to become a large producing nation for the world and a global economic powerhouse.
However, to capitalise on these opportunities, India needs free access to these markets, an accepted and established global currency to trade in and seamless trade settlements.

Creating a balance:

India has a robust external sector with a flourishing trading relationship with many nations and tremendous potential to expand trade.
Thus, opportunities to buy discounted oil or commodities may be enticing but if it entails a prolonged departure from the established order of dollar-based trade settlement or jeopardises established trading relationships with western bloc markets, it can have longer term implications for India’s export potential.
In the long run, India stands to gain more from unfettered access to the western bloc markets for Indian exports under the established trading order than from discounted commodities purchased under new bilateral currency arrangements that seek to create a new and parallel global trade structure.

Global economic environment:

India needs not just a non-aligned doctrine for the looming new world order but also a non-disruptive geo-economic policy that seeks to maintain the current global economic equilibrium.
To best utilise this opportunity, India needs not just cordial relationships with nations on either side of the new divide but also a stable and established global economic environment.
It is important for India to adopt a strategic economic self-interest doctrine within the larger paradigm of its non-alignment foreign policy.

Conclusion:

Strengthening India’s global economic might through a cautious geo-economic strategy in the aftermath of the Russia-Ukraine conflict can potentially mark a pivotal turn in India’s economic history.
The reshaping and realignment of the world order will be a unique opportunity for India to reassess its foreign policy, economic policy and geo-political strategy and don the mantle of global leadership.