Answer

Introduction

The liberal global order, anchored in multilateralism and rule-based trade, is undergoing a systemic fracture. As mercantilist practices where trade is used as a tool of state power return, the shift toward power-centric bilateralism forces India to navigate a volatile landscape to safeguard its sovereign interests.

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Impact on India’s Strategic Autonomy

• Evolution of Multi-alignment: India now leverages ties with competing blocs (e.g., U.S. and Russia) to maintain independence, avoiding the “vassalage” often seen in rigid alliances.
  Eg: India imported 40% of its crude oil from Russia in 2024-25 while simultaneously deepening tech ties with the U.S. via iCET, defying Western sanction pressures.
• Agile Issue-based Coalitions: The retreat from broad multilateralism has led India toward “minilateral” groups like QUAD and I2U2, which allow functional cooperation without formal treaty obligations.
  Eg: Joining the U.S.-led Minerals Security Partnership (MSP) for lithium access highlights “autonomy through diversification”.
• Strategic Leverage in Supply Chains: By positioning itself as a “critical supplier or buyer,” India creates a patchwork of mutual dependencies that deter external coercion.
  Eg: EAM S. Jaishankar recently asserted that India’s strategic autonomy is stronger today because it refuses to “choose sides” in a polarized world.
• Resistance to Institutional Pressure: The decline of WTO-led consensus allows India to resist “climate conditionalities” or trade rules that clash with its domestic developmental goals.
  Eg: India successfully secured a waiver for its S-400 deal with Russia despite the U.S. CAATSA law, reflecting “principled pragmatism”.

Capacity for Long-term Economic and Foreign Policy Interests

• Bilateral “Trade Renaissance”: The collapse of multilateral trade rounds has accelerated India’s pursuit of high-quality, bilateral Free Trade Agreements (FTAs).
  Eg: The historic India-EU FTA (January 2026) eliminates tariffs on 96.6% of goods, securing access to the world’s largest single market.
• Weaponization of Market Access: India is increasingly using its massive consumer market as a diplomatic “chip” to negotiate better terms for investment and technology transfer.
  Eg: Negotiations with the UAE and Gulf nations have moved beyond oil to strategic defense partnerships and LNG security..
• Shaping Global South Norms: India uses bilateral leadership to convert the “grievances” of developing nations into actionable global policy papers.
  Eg: Hosting the 3rd Voice of Global South Summit (2024) allowed India to act as a “policy arbiter” for 123 nations.
• Exporting Digital Public Infrastructure (DPI): Long-term influence is being built by sharing the “India Stack” (UPI, Aadhaar) with partner nations, creating lasting soft-power capital.
  Eg: Linking UPI with UAE’s Aani and Nepal’s payment networks creates a non-Western financial alternative.

Major Concerns and Challenges

• Transactional Pressure and Coercion: Power-centric bilateralism favors the stronger state, making India vulnerable to “transactionalism” from giants like the U.S. or China.
  Eg: Recent 50% tariffs imposed by the U.S. on select Indian goods (August 2025) highlight the instability of bilateral-only deals.
• Persistent Trade Deficit with China: A mercantilist world rewards manufacturing surplus, a field where India remains heavily dependent on Chinese intermediaries.
  Eg: Imports from China rose by 74% while exports fell by 33% between 2021 and 2025, weakening India’s strategic leverage.
• Erosion of Collective Bargaining: Without a functional WTO, developing countries lose the “safety in numbers” required to challenge the subsidies of advanced economies.
  Eg: India remains “too large to be ignored, yet too poor to influence global rules” effectively in the current fragmented order.
• Limited State Capacity: Internal weaknesses in health, education, and manufacturing limit India’s ability to convert its “demographic dividend” into hard power.
  Eg: Failure to expand a broad-based productive base reduces the “economic bite” India needs in a mercantilist world.

Conclusion

The era of “passive rule-taking” has ended. India must transition into an “Active Rule-Shaper” by strengthening its domestic manufacturing base and institutional capacity. A “middle-path” approach combining selective minilateralism with robust bilateral FTAs and a renewed social contract will ensure India’s relevance in a power-centric global order.

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