Syllabus: Economic Development
Overview: The global economic order is undergoing a major transformation. The US-China rivalry and rising populist-autocrats are reshaping trade, finance, and strategic calculations, creating both challenges and opportunities for India and the Global South.
Key Trends in Global Economic Transformation
- Rise of State-Capital Nexus
- Populist-autocrats prioritise large corporations and crony-capitalists over citizens.
- Public assets and policies are contorted to serve oligarchs, undermining the social contract.
- This shifts focus from laissez-faire capitalism to plutocratic state capitalism.
- Geopolitical Economic Realignments
- US recalibrates century-old strategies:
- Pushing chip manufacturing to the US from Taiwan.
- Securing trade routes of Panama and rare earths from Central Asia and Africa.
- Fusing digital currencies with foreign policy.
- Pressuring Europe and Israel to keep a check on Russia and West Asia, respectively.
- US recalibrates century-old strategies:
- Digital Capitalism and Financial Innovation
- Big Tech & cloud capitalists dominate global value chains, influence politics, and reward populist-autocrats.
- Digital colonialism: AI plans, Cloud Act, SWIFT weaponisation, and state-backed digital currencies.
- These systems may streamline finance but erode economic sovereignty and complicate political funding.
- Decline of Development Aid
- G-7 funding cuts ($44 billion) may push 5.7 million Africans into poverty by 2026.
- Reduced aid in Nepal triggered 8 lakh immigrants; cuts to the World Food Programme affected 16.7 million people in 2023, fueling migration, militias, and social unrest.
- US Tariffs and Sanctions
- Tariffs on 70+ countries and sanctions on 30+ nations disrupt trade, capital, people, and ideas.
- Surplus economies (Japan, Europe, China) face restricted market access.
- Global South Strategies
- Countries explore bilateral treaties, localised production, supply chain security, and de-dollarisation.
- These could trigger a domino effect, pushing the West toward independent economic paths.
Opportunities for India and Global South
- Historical dominance: India & China dominated world economy for 1,800 of last 2,000 years.
- Neoliberal globalisation failures:
- Led to sovereign debt, fiscal constraints, resource surrender, and inequality.
- 47% of the global population lives below $6.85/day; 735 million face hunger (2022 report).
- Strategic response:
- Forge a New Economic Deal with fairer representation in international financial institutions.
- Push for debt-relief frameworks, South-South partnerships, and fair trade policies.
- Build bipartisan foreign policy to sustain relations with key nations (US, Bangladesh, Nepal).
Domestic Recalibration for India
- State-led development:
- Government must lead in energy, infrastructure, data, defence, space, water, education, health, agriculture.
- Private sector cannot alone solve structural issues.
- Prevent oligopolies:
- Strong anti-monopoly norms and sovereign wealth funds like Norway.
- Invest in research & education:
- Strengthen scientific research, pedagogy, and public sector units.
- Strategically redeploy PSUs like China’s SOEs.
- Align digital-financial systems to constitutional and national goals.
Foreign Policy and Global Positioning
- Non-alignment or multi-alignment:
- India should adopt a substantive foreign policy, not performative and thus forge consensus across parties on national goals.
- Harness the opportunity:
- India can secure a rightful place in the emerging world order by combining strategic domestic reforms with creative global engagement.
Q- Analyze the concept of “digital colonialism” in the context of global economic transformation. What are the potential risks for India, and how can it safeguard its economic sovereignty? (10 marks/150 words)