India can be the fulcrum of the new global order

India can play a major role in supporting the new global order, as a peaceful democracy with economic prosperity.

Conflict and a reshaping

• The Russia-Ukraine conflict is reshaping the world order.
• Ever since the fall of the Berlin Wall in 1989, a paradigm of free societies, non-porous borders and open economies started governing order in many nations.
• It pushed free movement of people, goods, services and capital across the world.
• Global trade and per capita GDP nearly doubled, marking an era of general peace and prosperity.
• Societies and economies became intertwined closely in the pursuit of shared global prosperity.
• Such tight inter-dependence among nations will lead to fewer conflicts and promote peace, was the established wisdom.
• Russia-Ukraine conflict has dismantled this wisdom.
  • Retaliatory economic sanctions imposed on Russia have hurt all nations.
    • Egyptians are under 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.
    • 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’, a lived reality

• The ‘Global Village’ was built on the foundation of advanced transportation networks, and integrated payment systems.
• Any disruption to this delicate balance can plunge it into disequilibrium and derail the lives of all.
• India has also benefited 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 creating numbers of jobs.
• Trade with other nations should and will always be an integral cornerstone of India’s economic future.
• A reversal toward isolationism and protectionism will be calamitous for India.
• 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 Russian aggression in the UN constitute more than half the world’s population but a quarter of the world economy versus nations that condemned Russia, which account for three-quarters of the global economy.
• The former, Russia-China bloc, are large producers with rising consuming power while the latter, the western bloc, are today’s large consumers.
• 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 the foreign policy of non-alignment, trade was a small part of India’s economy.
  • 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.
• Western bloc of nations has expressed to embrace a new paradigm of ‘free but principled trade’ that values both morals and money.
  • 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, it needs free access to these markets, an accepted and established global currency to trade in and seamless trade settlements.

Needed, ties on either side

• Opportunities to buy discounted oil or commodities may be enticing but they can have longer-term implications for India’s export potential.
• In the long run, India will gain more from unfettered access to 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.
• India thus needs not just a non-aligned doctrine but also a non-disruptive geo-economic policy that can maintain the current global economic equilibrium.
• India can be both a large producer and a consumer.
• With rising inflation, volatile crude oil prices, global uncertainty, weak domestic private investment and deteriorating fiscal situation, expanded external trade in the changed global situation presents the best opportunity to salvage India’s economy and create large numbers of jobs for our youth and women.
• 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.

Social harmony is a must

• It is imperative for India to maintain its domestic social equilibrium.
• To be a large-scale producing nation, India needs millions of factories with hundreds of millions of people of all religions and castes across all States to work together.
• Social harmony is the edifice of economic prosperity.

Conclusion

The reshaping and realignment of the world order will be a unique opportunity for India to reassess its foreign policy, economic policy and geopolitical strategy and don the mantle of global leadership. 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. But this requires India to first stem the raging communal divisions within.

Exam track

Prelims take away

• 1991 Economic reforms

Mains track

Q. Amidst the ongoing Russia-Ukraine conflict, India can play a major role in supporting the new global order, as a peaceful democracy with economic prosperity. Comment.