Is India Prepared for the End of Globalisation?

Why in the news?

• India’s Economic Survey 2025-26 states export controls, tech curbs & carbon border taxes signal the end of naive globalisation globally.
• It emphasizes “Swadeshi” (self-reliance) to build resilience against external shocks.
• India is also negotiating major trade pacts (e.g., with the EU) to secure diversified partnerships amid global economic shifts.

Return of Mercantilism and the End of Globalisation

• Transactional diplomacy: President Trump’s remarks on India’s Russian oil imports reflect a coercive, personality-driven approach to bilateral trade.
• Tariffs as leverage: Trade policy is used as a direct political threat, not as a rules-based economic instrument.
• Systemic breakdown: The crisis is not limited to global trade flows, but to the political framework that governed them.
• Rise of mercantilism: Trade is reimagined as state power—exports signal strength, deficits signal vulnerability.
• Beyond free trade: Globalisation was a political order shaping markets, governance, and international cooperation.
• Ideological shift: Once linked to liberalism, democracy, and multilateralism, that order is now unraveling.
• New reality: A power-centric, fragmented global system is replacing cooperative globalisation.

A New Order

Globalisation Before Liberalism

• The world economy became global long before it became liberal or rules-based.
• Early globalisation was founded on force rather than consent or cooperation.
• Wealth in the industrialised North was accumulated through intensive domestic exploitation and overseas resource extraction.
• Trade relations were inherently unequal and extractive, not genuinely free or fair.

Mid-20th Century Transition

• By the mid-20th century, global conditions shifted significantly.
• Industrialised countries were weakened by war, while colonised societies began asserting political agency.
• This moment created the conditions for a new global order.

Rise of Sovereignty and Global Institutions

• Political sovereignty expanded rapidly across newly independent states, often outpacing the spread of democracy.
• Multilateral global institutions were established to provide a normative framework for managing international affairs.
• These institutions aimed to regulate power, coordinate cooperation, and reduce overt coercion.

Normative Restraint and Legitimacy

• Even when powerful states acted unilaterally, their actions were justified in the language of democracy, regional stability, or humanitarian concern.
• The legitimacy of the global system rested on this restraint and adherence to shared norms.
• Power was exercised, but it was cloaked within an accepted moral and institutional framework.

Erosion of the Multilateral Order

• This normative restraint has now been openly abandoned.
• The gap between power and principle has become explicit, undermining the system’s legitimacy.

Political Assumptions of the Post-war System

• The global order rested on key political assumptions rather than purely economic logic.
• Open markets were broadly accepted as engines of growth.
• Capital was allowed to move freely across borders, while the movement of people remained restricted.
• Cross-border contracts were enforced through international legal and institutional mechanisms.
• Shared global resources were managed through negotiation rather than coercion.

Temporary Success and Fragility

• For a period, these assumptions appeared to hold.
• Many countries experienced sustained economic growth and significant reductions in poverty.
• However, the stability of the system depended on continued belief in these shared norms, a belief that has now begun to unravel.

Unintended Consequences of Globalisation

Economic Imbalances and Social Backlash

• Returns to capital grew far faster than wages, widening inequality within and across countries.
• Deeper integration of global markets and supply chains intensified competitive pressures.
• Manufacturing declined in some regions while concentrating heavily in others, creating regional distress.
• Migration from poorer to richer countries increased as opportunities became unevenly distributed.
• These economic and social dislocations made the rise of populist politics inevitable.

China and the Disruption of the Post-colonial Order

• The rise of China unsettled the geopolitical foundations of the post-colonial global system.
• China integrated into the global economy and accumulated wealth and power without fully adhering to multilateral norms.
• It benefited from global markets, supply chains, and technology while maintaining strong state control over capital, labour, and information.
• China’s persistent trade surplus reflects a strategy based on excess capacity and dependence on external demand.
• This model constrained the industrial ambitions of poorer countries, including India.
• Over time, China emerged as an alternative model combining rapid economic growth with consolidation of domestic political power.

Changing Attitudes Towards Globalisation

• Together, rising inequality and China’s ascent altered how major economies perceived globalisation.
• Global cooperation began to be seen as an opportunity cost or a distraction rather than a benefit.
• Populist politics pushed societies towards inward-looking, nationalist responses.
• States increasingly asserted sovereignty at the expense of liberal values.
• This was reflected in the politicisation of migration and the revival of industrial policy to achieve self-sufficiency.
• As a result, globalisation in its earlier liberal, cooperative form has effectively ended.

Implications for the Developing World

• The support of global cooperation has already weakened for developing countries.
• International aid is increasingly conditional on the national interests of donor states.
• With multilateral institutions under strain, collective bargaining on issues like climate change and illicit financial flows is eroding rapidly.
• At home, growing youth populations are increasingly restless and demand more effective governance and economic opportunities.
• Political elites must recognise the scale of this transition and respond decisively, even if driven initially by self-interest.

India’s Role in the Emerging Global Order

Structural Paradox

• India occupies an uneasy position: too large to be ignored globally, yet too poor to decisively shape outcomes.
• Its size gives it visibility, but limited economic and institutional strength constrains influence.

Missed Demographic Opportunity

• Over the past 15 years, India has failed to convert its demographic advantage into productive capacity.
• Employment creation and skill development have lagged behind population growth.
• The social pyramid has become sharply stratified, with a large, poor, and powerless base supporting a narrow elite apex.

Pockets of Strategic Potential

• India still has the capacity to emerge as a serious player in select domains rather than across the board.
• Digital public infrastructure stands out as a major strength with global relevance.
• Additional potential exists in renewable energy, the services sector, and democratic decentralisation.
• These niches could offer India leverage in a fragmented, mercantilist global order.

Constraints of the Current Political Economy

• Realising these opportunities is difficult under the prevailing political and economic structure.
• Economic growth has not been matched by a credible effort to broaden participation.
• Sustained public investment in health and education has remained inadequate.
• The benefits of growth have not sufficiently expanded the productive base of society.

State Capacity in a Mercantilist World

• In a global order defined by mercantilism, state capacity becomes decisive.
• Weak institutions and limited administrative capability will translate into long-term irrelevance.
• Countries without the ability to mobilise resources and coordinate policy will be marginalised.

Risk of Rhetorical Power

• Without stronger state capability, greater social cohesion, and a renewed social contract, India’s global aspirations will remain hollow.
• Claims of being a Vishwaguru cannot substitute for institutional strength and economic depth.
• Rhetoric alone is insufficient in a world where power increasingly flows from capacity, cohesion, and shared growth.

Source: https://www.thehindu.com/opinion/op-ed/is-india-prepared-for-the-end-of-globalisation/article70566036.ece

Mains Question (250 words):

“Globalisation is no longer a liberal, cooperative order but a mercantilist, power-driven system.” Examine the political assumptions of the post-war global order and analyse why they are breaking down today.