A profound shift in the global order

The Hindu

02-05-2025

India is at another inflexion point, reminiscent of Vasco De Gama sailing into Kozhikode in 1498 and of a complacent Zamorin lacking strategic intention. Instead of trade routes, global value chains are being reshaped by force. The stakes are high for India which is in line to be the third largest economy.
The 75-year-old post-colonial order, labelled as globalisation, characterised multilateralism imposing rule-based restrictions on all for the common good. Its conceptual foundation of a world divided between 'donors' and 'recipients' became obsolete with China 'overtaking' the United States as the largest donor, and in the share of manufacturing and global trade. The World Trade Organization and the United Nations and Treaties lost their utility to the proponents, leading to U.S. withdrawals. The COVID-19 pandemic exposed the G-7 scrambling to corner medicines, oblivious of the plight of others. Now, the G-7 is splitting leaving a vacuum and global institutions such as BRICS will soon have more requests for membership.
U.S. President Donald Trump is not whimsical. He is responding to a more equal world moving out of the colonial frame that is attempting to hold on to fading benefits. Bilateral deals are forcing countries to subordinate their interests and the way tariffs have been described and defined arbitrarily based on trade imbalance intrudes into how national laws should be changed. Least Developed Countries no longer have privileges. The U.S. is restructuring its approach to prosperity and power and so should the others.
A post-WTO frame
The 'breakup' of the G-7 and G-20 now leaves global agenda-setting open. Since 2020, the U.S., China, the European Union and India have together contributed nearly three-quarters of all growth, with the U.S. and China accounting for almost half. There is also a decline in the relative power of the U.S. Russia has become an Asian power, increasing energy links with China and India.
Asia will soon again have two-thirds of global wealth and power (as had been the case throughout civilisation except for the age of colonialism). Geopolitics has returned to its natural state of co-existence sharing prosperity.
India has to be strategic to grasp new opportunities with the 'dismantling' of the WTO just as China used its entry into the WTO for its rise. The U.S. and China are pretty much evenly balanced in terms of influence, trade, technology, defensive military capacity and playing tit-for-tat on tariff levels. The challenge is to manage trade relations with the U.S. pushing its agricultural and energy surplus and to build on the rapprochement with China.
The future direction has been set in the recent statement of Prime Minister Narendra Modi that this is the Asian Century. The turmoil within the Association of Southeast Asian Nations (ASEAN) is an opportunity to jointly work towards an Asian common market, with bilateral concessions to share prosperity. As the WTO's 'most-favoured nation' clause of non-discrimination withers away, it is in India's longer term interest to propose a new cooperative architecture to ASEAN and the African Union, as their potential consumption will exceed current consumption in the U.S. and Europe.
India's world-class diplomats should be given the task of coming up with a new type of principles of global governance for a more equal world. Gaining from global value chains that are dependent more on technology than on tariffs requires laying out a new type of rules that reduce non-tariff barriers and treat linkages between goods, services, investment and infrastructure as part of composite agreements, with a review of national impacts annually.
Trade and innovation neglected
Emerging from colonialism, India framed foreign policy in terms of a balancing between the great powers, relying on tactics than on strategy. The first challenge to the post-colonial world was the Bandung Conference of newly independent Asian and African countries in 1955. Jawaharlal Nehru moved to the Non-Aligned Movement in 1961, shifting from economic development to peace in a divided world, becoming a darling of the West while India remained poor. The best diplomats are still sent to negotiate resolutions in the United Nations, ignoring rights and opportunities through trade. India also ignored what other leading powers were doing — technological innovation in partnership with academia and industry, which is the other side of the coin of trade.
Now is the time for hard decisions to be taken to develop a national consensus between political parties and States on how to nurture talent and focus on skills and employment in order to regain our technological edge, wealth and global status. The West developed on the foundation of colonialism unlike the East. New policy groups need to engage and seek complementarity with China, ASEAN and Africa as value chains get restructured. There will no longer be global goods and treaties to which others can subscribe; the smaller countries that have been hit hardest by the new order are looking for an alternative to choosing sides
India has the endogenous capacity to aim for global technological leadership by developing open source software that will shape future multilateralism and international cooperation. Huawei, which was sanctioned by the U.S. for spreading telecommunication networks worldwide, is manufacturing 7-nanometer (7nm) chips just behind global technology leaders. The DeepSeek open source AI model is cheaper than and as good as the best in the U.S.. Fifteen years ago, a World Bank study noted that China has reached global scale in the hardware industry but not in software. India had achieved the reverse, then faltered.
Lesson from China
The most important lesson in China's re-emergence is national consensus on endogenous pathways to achieve prosperity, and not looking at socio-economic growth through the modelling prism of the West. Patents are a better indicator of future prosperity than GDP. Reducing the price of assured electricity is the most effective incentive for a restructuring of the economy, and prosperity is the optimum adaptation to adverse effects of climate change.
India needs to formulate grand challenges with academia and industry to leverage its world-class human talent, vast data and proven digital stack to build the best large language models in the world, which would make India a formidable cyber power. In the digital world, the foundation of wealth and influence is AI, which is reminiscent of India clothing the world for millennia relying on skill and not monopoly.
Mukul Sanwal is a former UN diplomat