Third Globalisation and India

Source: This post on Third Globalization and India has been created based on the article “Reconfiguration of global trade and FDI” published in “Business Standard” on 22^nd January 2024.

UPSC Syllabus Topic: GS Paper 1 – Indian Society – Effects of Globalization.

News: The article discusses the undergoing changes in Globalization. It also highlights its impact on India.

Earlier, the ‘Second Globalization’ featured unconditional access for the periphery (underdeveloped world) to the core (developed or advanced economies) of the world economy. However, it is currently undergoing changes.

What is ‘Second Globalization’?

It broadly refers to the international regulations and organizations to support economic integration at the global level created after World War II, as part of the Bretton Woods Agreement of 1944.

The technologies of telecommunication, container ships, wide-body aircraft, and modern finance yielded unprecedented levels of cross-border activity.

The core gave complete access to their economic and technological progress even to countries that were unfriendly or hostile.

How is globalization undergoing change with Third globalisation?

Since 2018, the third globalization has emerged.

According to the author, the ‘third globalization’ (currently) makes the access given in the 2^nd globalization, (for the periphery to the core) more conditional based on foreign policy and military alignment.

It has seen access to the core being given in more limited ways for countries that have a hostile foreign policy and military stance. The core does full integration with each other, but they impose limitations upon hostile nations, having impact on both trade and FDI. For instance, since 2018, China’s share in USA’s imports has dropped sharply.

What should be the way forward for India?

1) For India’s Foreign Policy:

1. In the case of China: There is a substantial trade engagement with China, hence there should not be any sudden disruptions.
2. For rest of the world: India should be a status quo power, which will work with the core and try to obtain economic growth in the coming years.

2) For Firms: Strategy thinking at firms needs to bring a better understanding of the political system in various countries, the risks associated with doing business in undemocratic countries, and the evolving rules of the game that are being established by the core.

Question for practice:

How is Globalisation undergoing change? What implications will it have on India and how should it be tackled?