Is India Prepared for the End of Globalisation?

UPSC Syllabus Topic: GS Paper 1 -Globalisation

Introduction

Global trade is no longer guided by cooperation and shared rules. Power politics is replacing multilateralism. Trade is now used as a tool of pressure and control. This shift marks the collapse of the liberal global order. A new mercantilist system is emerging. The key concern is whether India has the economic strength, institutions, and social capacity to survive and remain relevant in this changed world.

Globalisation as a Political and Institutional Order

1. Globalisation beyond free trade: Globalisation was not only about goods and services. It was a political system that shaped markets, states, and global behaviour.
2. Link with liberal values: It became associated with liberalism, democracy, and international cooperation through global institutions.
3. Historical roots of global economy:

• The world economy was global long before it was liberal. Early globalisation relied on force and unequal trade.
• Colonial wealth accumulation: Industrialised countries grew through domestic exploitation and overseas resource extraction. Trade was unequal, not free.
• Post-war institutional framework: After the mid-20th century, new global institutions emerged to manage international affairs through shared norms.

4. Legitimacy through restraint: Powerful countries justified actions in the name of democracy, stability, or humanitarian values. This restraint gave legitimacy.
5. Core political assumptions: The system rested on open markets, free movement of capital but not people, cross-border contracts, and negotiated resource management.
6. Temporary success: For some time, this framework supported economic growth and reduced poverty across many regions.

Structural Fault Lines within Liberal Globalisation

1. Rising inequality: Returns to capital increased much faster than wages, leading to widening income inequality.
2. Uneven industrial outcomes: Manufacturing declined in some regions while expanding sharply in others, creating global production imbalance.
3. Pressure on labour and employment: Deep global supply chains increased competition and weakened job security.
4. Rising migration pressures: Uneven development pushed migration from poorer to richer countries.
5. Emergence of populist politics: Economic stress and social insecurity created public resentment, strengthening inward-looking populist movements.

Geopolitical Disruption from the Rise of China

1. Entry without institutional compliance: China integrated into the global economy without accepting multilateral rules or liberal political values.
2. Strong domestic state control: The state retained tight control over capital, labour, and information.
3. Unequal benefits from globalisation: China gained access to markets, technology, and supply chains while avoiding institutional obligations.
4. Excess-capacity-driven growth model: Its economy relied on overproduction and sustained external demand.
5. Large and persistent trade surplus: This model generated massive trade surpluses, reflecting mercantilist behaviour.
6. Impact on developing economies: China’s dominance constrained industrial growth in poorer countries, including India.
7. Emergence of an alternative model: China combined rapid economic growth with political centralisation, challenging the liberal global order.

Collapse of Multilateralism and Return of Mercantilism

1. Changing global perception:

Major economies began viewing cooperation as a cost rather than a benefit.

Inward-looking politics: Populism pushed societies toward national interest over shared responsibility.

End of liberal restraint: States now exercise power openly without moral or institutional justification.

Return of mercantilism: Trade is treated as an instrument of state power. Surpluses signal strength; deficits signal weakness.

2. Policy tools of the new order:

• Tariffs, sanctions, and bilateral pressure are replacing multilateral negotiations.
• Industrial self-sufficiency: Countries promote industrial policy to reduce dependence on others.
• Politicisation of migration: Migration is used as a political issue rather than a development concern.

3. Weakening of global institutions: Multilateral bodies are losing authority and effectiveness.
4. Conditional international aid: Aid is increasingly tied to donor countries’ national interests.
5. Shrinking space for developing nations: Joint negotiation on climate change, illicit financial flows, and global commons is weakening rapidly.
6. Rising domestic pressure: Youth populations demand jobs, growth, and accountability from governments.

India’s Position and Constraints in the New World Order

1. Strategic contradiction: India remains too large to be ignored in global affairs, yet too poor to significantly influence global rules and institutions.
2. Lost demographic window: Over the past 15 years, India failed to convert its demographic advantage into productive economic capacity.
3. Weak productive base: Job creation and manufacturing expansion have remained limited, reducing India’s economic bargaining power.
4. Deepening social divide: The social pyramid has become sharply unequal, with a large poor base supporting a narrow and powerful apex.
5. Growth without inclusion: Economic growth has not expanded opportunities widely across society or strengthened human capital.
6. Low public investment: Sustained spending on health and education has remained inadequate to support long-term productivity.
7. Limited state capacity: Weak administrative and institutional capacity restricts India’s ability to compete in a mercantilist world.
8. Conditional global relevance: Without stronger institutions and social cohesion, India risks long-term marginalisation despite its size.
9. Areas of potential strength: India has scope in digital public infrastructure, renewable energy, services, and democratic decentralisation.

Conclusion

The liberal era of globalisation has ended. The emerging mercantilist order rewards state capacity, social cohesion, and productive strength. India cannot rely on rhetoric or demographic size alone. Without stronger institutions, wider investment in health and education, and fair growth sharing, global relevance will remain out of reach.

Question for practice:

Examine how the end of liberal globalisation and the return of mercantilism are reshaping the global order, and assess India’s preparedness to adapt to this transition.

Source: The Hindu