This is India’s moment of reckoning 

News: Recently, there have been global developments of conflict and violence in Ukraine. It has been followed by the imposition of the western economic sanctions on Russia. This has presented new opportunities and threats to the world, especially India. 

What have been the trends since the fall of the Berlin Wall in 1989?  

There was an evolution of a paradigm of free societies, frictionless borders and open economies.  

The global order allowed freer movement of people, goods, services and capital across the world. Therefore, global trade and per capita GDP nearly doubled in this period.  

During this period, the Societies and economies in the world became inter-dependent in the pursuit of shared global prosperity. It led to fewer conflicts and more peace and prosperity. 

What can be the impact of the Russia-Ukraine conflict, especially from an Indian perspective? 

This global geo-economic conflict can push the world to the Cold War era of two dominant power blocs. It will disbalance the global economic equilibrium. The Russia-China bloc is a large producer group. The western bloc is today’s largest consumer group.  

It has dismantled inter-connectedness and trade among nations. This led to disruption and blockade of various commodities like Russian natural gas, Russian & Ukrainian Wheat, Russian nickel. For example, Indian farmers run the risk of high fertilizer prices triggered by a global shortage.  

What are the opportunities for India? 

First, the western group looks to reduce dependence on the Russia-China bloc of nations. Therefore, it offers opportunities to India. India can expand trade in the current global economic structures of free trade 

Second, the western nations have wished to develop a new paradigm of ‘free but principled trade’. India can gain from this ‘principled trade’. India is the largest peace-loving democracy. India can become a large producing nation for the world and a global economic powerhouse.  

The present global situation presents the best opportunity to salvage India’s economy. It can help create large numbers of jobs for our youth and women. 

What are the challenges before India in capitalizing the new opportunities? 

The forced and hurried dismantling of the present order of the American dollar as the global trade currency and replacing it with rushed bilateral local currency arrangements can prove to be more detrimental for the global economy in the longer run.

For example, Indian rupee-Russian rouble agreement in the late 1970s and 1980s, were fraught with risks. 

India’s external sector is robust. India has the potential to expand trade. But the bilateral arrangements are unsustainable, unwieldy, and perilous.  

Way Forward 

Mahatma Gandhi said India must be committed to peace and non-violence, both at home and in the world. 

Earth is a ‘Global Village’. It is home for nearly eight billion people. It works on the transportation networks, the U.S. dollar as the reserve currency and integrated payment systems.  

India’s economic future depends on trade with other nations. A reversal towards isolationism and protectionism can be bad for India. It needs an accepted and established global currency to trade in and seamless trade settlements. 

India needs to get free access to the markets to capitalise on the available opportunities. 

In the long run, India stands to gain more from the established trading order as well as free access to the western markets instead of bilateral arrangements and a new and parallel global trade structure. 

India needs a non-aligned doctrine for the looming new world order. It also needs a non-disruptive geo-economic policy to maintain the current global economic equilibrium.  

Hence, it should adopt a strategic economic self-interest doctrine within the larger paradigm of its non-alignment foreign policy. 

India needs to balance the current geo-economic equilibrium, and needs to maintain its domestic social equilibrium. It requires people of all religions and castes to work together in factories.  

Therefore, the government should address mutual distrust, hate and anger among citizens. It should promote social harmony which is quintessential for economic prosperity.  

Source: The post is based on an article “This is India’s moment of reckoning” published in The Hindu on 22nd April 2022.