[Answered] Critically analyze the evolving challenges to globalization and their impact on India’s economic growth. Evaluate the effectiveness of India’s strategies in building resilience and leveraging new opportunities in this changing global landscape.

Introduction

Globalization, once the uncontested driver of global prosperity, is undergoing a significant transformation. For India, which benefited immensely from integration into global markets post-1991 reforms, these shifts present both risks and opportunities. With global trade slowing, rising protectionism, and geopolitical realignments, India’s path to sustained economic growth must now rely on greater internal resilience and strategic external engagement.

Evolving Challenges to Globalization

1. Rise of Protectionism: The US, traditionally a champion of free trade, has increased its average effective tariff rate to 28%, the highest since 1901 (Yale Budget Lab). Trade wars, notably the US-China conflict, undermine the principles of comparative advantage and supply chain integration.
2. Structural Slowdown in Global Trade: IMF projects global trade growth at just 1.7% (2025) and 2.5% (2026), a significant decline from the historical average of 5.8% (1995-2023). This deceleration is not event-specific (like COVID-19) but rooted in deeper structural shifts.
3. Geopolitical and Economic Uncertainties: Escalating regional tensions (e.g., post-Pahalgam developments) can negatively impact investment climates and global investor sentiment towards emerging economies like India.
4. Impact on India’s Economic Growth: Slower global trade could lower India’s GDP growth by at least one percentage point. Export sectors, including manufacturing and merchandise trade, face risks of reduced demand and tighter competition.

India’s Strategic Response and Resilience Building

1. Macroeconomic Stability: Inflation remains low at 3.3% (March 2025), forex reserves have surged to $686 billion, and the rupee has stabilized. These indicators enhance India’s ability to withstand external shocks.
2. Service Export Diversification: India’s dominance in software exports, business process outsourcing (BPO), and global capability centers (GCCs) continues to generate revenue and employment.
3. Policy Reforms: Emphasis on ease of doing business through regulatory simplification, single-window clearances, and decriminalization of minor offenses. Strengthening of programs like Make in India 2.0, PLI schemes, and Startup India to boost domestic manufacturing and innovation.
4. Trade Diversification: India is actively pursuing new FTAs with the UAE, Australia, and the European Union to reduce dependency on traditional partners.
5. Digital and Green Economy Initiatives: Leveraging digital public infrastructure (e.g., UPI, ONDC) and investing in renewable energy to tap into future growth sectors.

Critical Evaluation

1. While India has demonstrated commendable resilience, challenges remain.
2. Regulatory overhauls are uneven across states, and infrastructure bottlenecks persist.
   Moreover, while services exports are strong, manufacturing exports—critical for job creation—are yet to realize their full potential.
3. Global uncertainty requires India not just to “de-risk” but to deepen domestic reforms, invest in skill development, and enhance competitiveness across sectors.

Conclusion

The global landscape may be shifting away from hyper-globalization, but India’s strategic focus on macroeconomic stability, regulatory reform, digital transformation, and trade diversification positions it well to adapt.  However, to fully capitalize on emerging opportunities, India must accelerate structural reforms and embrace a growth model that balances internal resilience with strategic global engagement.