Is India Prepared For The End Of Globalization?

Recent remarks by the U.S. President Donald Trump linking trade, tariffs, and India’s oil imports highlight a shift in global economic relations from rules-based cooperation to power-centric bilateralism.

The Shift from Liberalism to Neo-Mercantilism

The global economy is witnessing a return to Mercantilism, where economic policy serves as a tool for national security.

• Trade as Power: Modern trade is increasingly viewed as an instrument of state power rather than a mutual benefit.
• Zero-Sum Logic: Nations now equate trade surpluses with national strength and deficits with strategic weakness.
• Erosion of Restraint: Major powers have abandoned the “normative core” of global institutions, openly exercising unilateral power to protect domestic interests.

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Catalysts of Global Transformation

• Rise of Populism: Economic integration caused returns to capital to grow faster than wages. This led to manufacturing declines in the West and triggered inward-looking populist movements that reject open borders.
• The China Challenge: China provided a successful alternative model by achieving immense wealth through global markets while maintaining strict state control over capital and information. 
  • This “excess capacity” model has stunted the industrial growth of other developing nations like India.

Challenges for the Developing World

• Weakening Multilateralism: Developing nations can no longer rely on global cooperation to negotiate on critical issues like Climate Change or Illicit Financial Flows.
• Conditional Aid: International assistance has shifted from being developmental to being strictly tied to the national interests of donor countries.

India’s Strategic Challenges

• The Demographic Paradox: India has largely failed to convert its vast youth population into a productive workforce over the last 15 years.
• Economic Stratification: The domestic economy is characterized by a narrow apex of wealth supported by a massive, powerless base of the poor.
• Low State Capacity: A lack of sustained public investment in Health and Education prevents India from building the institutional foundations needed to be a global leader.

Way Forward

• Leveraging Niche Strengths: India must double down on domains where it holds a competitive edge, such as Digital Public Infrastructure (DPI) and Renewable Energy.
• Rebuilding the Social Contract: There is an urgent need for a commitment to sharing growth more evenly to ensure social cohesion.
• Institutional Strengthening: Moving beyond rhetoric requires building state capability and investing in human capital to avoid long-term irrelevance in a mercantilist world.

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Conclusion

India’s claim to Vishwaguru must rest on internal strength, not rhetoric. Without robust state capacity and focus on the bottom of the pyramid, India risks marginalisation in a global order driven by economic and industrial power.

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