From hyperglobalisation to slowbalisation and fragmentation

Detail

1. The background: from protection to opening

• 1950s–1980s: protection. India put up barriers to foreign trade and foreign investment. The aim was to protect young Indian producers from foreign competition.
• 1991: opening. A balance of payments crisis (India did not have enough foreign currency to pay for its imports) led to the LPG reforms:
• Liberalisation: the government removed many controls on business.
• Privatisation: a bigger role for private firms.

• Globalisation: closer links between India's economy and the world economy.

• Globalisation means the fast joining together of countries' economies through trade, investment, technology and the movement of people. MNCs (multinational corporations, i.e. companies that own or control production in more than one country) are a major force behind it.

• India opened up just as the world entered its most intense phase of integration. That phase is called hyperglobalisation.

2. Measuring globalisation: two simple tools

• Trade-to-GDP ratio (also called trade openness): how large a country's or the world's trade is compared with its total output.
• Formula: Trade-to-GDP ratio = (Exports + Imports) ÷ GDP × 100

• Worked example (illustrative figures): exports = ₹40 lakh crore, imports = ₹50 lakh crore, GDP = ₹300 lakh crore → (40 + 50) ÷ 300 × 100 = 30%.

• Trade–income elasticity: how fast trade grows compared with GDP.

• Formula: Elasticity = % growth in world trade ÷ % growth in world GDP
• Worked example (illustrative figures): trade grows 6% and GDP grows 3% → 6 ÷ 3 = 2. Trade is growing twice as fast as output, which is the hyperglobalisation pattern.
• Trade grows 3% and GDP grows 3% → 3 ÷ 3 = 1. Trade only keeps pace with output, which is the slowbalisation pattern. The trade-to-GDP ratio stays flat.

3. Phase 1: Hyperglobalisation (about 1990–2008)

• Definition: a period when world trade grew much faster than world GDP. Countries became more closely linked every year.
• Drivers:
• ICT (information and communication technology). Cheap phone calls, the internet and computers made it easy to run a business across countries. This also made outsourcing to India possible (Class 11 NCERT: call centres, BPOs, IT services).
• Containerisation: goods travel in standard steel boxes that move easily between ships, trains and trucks. This cut shipping costs a great deal.
• End of the Cold War (1991): former socialist countries joined the market economy.
• China's WTO entry (December 2001): China became the "factory of the world".
• GVC boom: global value chains are the steps of making one product spread across many countries. For example, a phone is designed in the US, its chips are made in Taiwan and it is assembled in China. This is the MNC production pattern described in the Class 10 NCERT chapter.

4. Phase 2: Slowbalisation (after the 2008 global financial crisis)

• Definition: world trade grows no faster than world GDP, so the trade-to-GDP ratio plateaus (stays flat). Integration is not reversing. It has stopped deepening.
• Evidence on FDI: the IMF dates slowbalisation, for most countries, to the period after the global financial crisis. Global FDI fell from 3.3% of world GDP (2000s) to 1.3% (the five years before 2023) [2].
• FDI (foreign direct investment) means a foreign company buys or builds long-term productive assets in another country, such as factories or firms.

5. Phase 3: The shock era (2018 onwards)

One shock followed another. Each one made countries worry more about depending on others.

• US–China trade war (2018): the two countries raised tariffs on each other's goods.
• COVID-19 (2020–21): factories shut, supply chains broke and there were shortages of masks, medicines and chips.
• Russia–Ukraine war (2022): food, fuel and fertiliser prices jumped, and sanctions split markets.
• Red Sea shipping attacks (2023–24): ships had to go around Africa, so freight costs and delivery times rose.
• India's view: the Economic Survey 2024-25 lists the Red Sea crisis, the Ukraine war and drought in the Panama Canal as disruptions to global trade. Together with rising protectionism, they created uncertainty [6].
• Protectionism means shielding domestic producers from foreign competition through tariffs, quotas and rules.
• Technical Barriers to Trade (TBT) are product standards and testing rules that can block imports. They affected 31.6% of product lines, which covered 67.1% of global trade (December 2024) [6].
• The Survey says geo-economic fragmentation (GEF) is replacing globalisation [6].

6. Key terms: learn the differences

• Slowbalisation: trade grows only as fast as output, and the trade-to-GDP ratio is flat. This is a slowdown, not a reversal.
• Deglobalisation: an actual reversal of integration. Trade, investment and cross-border flows fall relative to world output.
• Geoeconomic fragmentation: a policy-driven splitting of the world economy into rival blocs along strategic and security lines.
• It works through several channels: trade, migration, capital flows, technology diffusion and global public goods [2].
• Cost (IMF SDN/2023/001): in the long run, trade fragmentation alone could cost about 0.2% of global GDP (limited case) to almost 7% (severe case) [2].
• The 7% loss is about US$7.4 trillion. That is roughly the combined yearly output of Germany and Japan [2][3].

• If technological decoupling is added, some countries could lose up to 12% of GDP [2].

• Decoupling: a deliberate separation of the trade, investment and technology links between major economies, especially the US and China.

• Tools: tariffs, chip export controls, and the CHIPS and Science Act (2022, US), which gives subsidies for chip-making at home.

• Re-globalisation (WTO World Trade Report 2023):

• Definition: a renewed drive to bring more people, more economies and more pressing issues into world trade [4].
• The report argues it works better than fragmentation for three goals: national and economic security, poverty reduction and environmental sustainability [4].
• Evidence the report uses: open trade is linked with a lower chance of conflict. It has helped cut poverty sharply for over four decades. Digital services trade, trade in environmental goods and GVCs are all expanding [4].

7. Is globalisation dead? The evidence is mixed

Signs of retreat

• Goods trade-to-GDP has plateaued.
• Trade restrictions are rising, including tariffs, non-tariff measures (NTMs) and TBTs [6].
• FDI is splitting along geopolitical lines: investment now flows between "friendly" countries (UNCTAD World Investment Report). FDI fell to 1.3% of world GDP [2].

Signs of life: services and digital trade

• Digitally delivered services are services supplied over computer networks, such as IT, finance and consulting.
• They reached US$4.25 trillion (2023), up 9% from 2022. That is 13.8% of world exports of goods and services [8].

• They are over 50% above pre-pandemic levels (2023) and make up over 54% of services exports [8].

• Global computer services exports grew 13% (January–September 2024) [9].

Why this helps India

• India's total exports hit a record US$824.9 billion (2024-25). They were US$778.1 billion in 2023-24, a rise of 6.01% [7].
• India's services exports hit a record US$387.5 billion (2024-25). They were US$341.1 billion in 2023-24, a rise of 13.6% [7].
• India is the 2nd largest exporter of "Telecommunications, Computer and Information Services", with a 10.2% global share. It ranks 7th in total services exports, with a 4.3% share [5].

Best reading: globalisation is being rewired, not reversed.

• Goods trade is moving towards friendly and nearby countries.
• Services and data trade keep growing.

8. Link to NCERT

• Class 11 (keec103, section 3.5): critics said market-driven globalisation widened the gaps between nations and between people. Big firms and rich countries gained more.
• Class 10 (jess204): globalisation has not been fair to everyone. Small producers and workers faced strong competition and insecure jobs. NCERT calls for fair globalisation.
• The link today: people who felt left out by globalisation now back politicians who oppose open trade. This pushes governments towards tariffs, bringing production back home ("reshoring") and trading only with friends ("friend-shoring").

9. Cross-reference

• The 2025-26 US tariff shock and the India–US trade negotiations are covered in international-trade-policy.

Prelims Hooks

• Slowbalisation = world trade grows no faster than world GDP, so trade-to-GDP is flat. Deglobalisation = trade relative to output actually falls. Examiners like to swap these two.
• Geoeconomic fragmentation is policy-driven (bloc-based, on security lines). It is not caused by market forces.
• IMF SDN/2023/001: trade fragmentation could cost from 0.2% to almost 7% of global GDP in the long run. Adding tech decoupling could cost some countries up to 12% of GDP.
• China joined the WTO in December 2001. This was a key driver of hyperglobalisation.
• The CHIPS and Science Act (2022) is a US law. It is a tool of US–China decoupling.
• "Re-globalisation" was proposed in the WTO World Trade Report 2023, not by the IMF or the World Bank.
• Digitally delivered services were US$4.25 trillion (2023), 13.8% of world exports (WTO).
• India's services exports were a record US$387.5 billion (2024-25). India is 2nd in telecom, computer and information services exports, with a 10.2% share.
• Trade-to-GDP ratio = (Exports + Imports) ÷ GDP × 100.

Mains Points

• Rewired, not reversed: goods trade and FDI are splitting into blocs, but services and digital trade are at record highs. India should lean into this through IT/GCC exports and digital trade rules, while building goods GVC links through PLI schemes (production-linked incentives) and FTAs (free trade agreements).
• Cost of fragmentation vs. security: the IMF estimates the cost at up to about 7% of world GDP. Countries accept part of this cost to secure supply chains (chips, medicines, energy). Trade-off: more resilience means higher costs and lower efficiency. India can gain as a "China+1" destination.
• Multilateralism vs. blocs (GS-II link): the WTO's re-globalisation agenda needs a working dispute settlement system. India, as a Global South voice, can push for inclusive re-globalisation that includes services, digital trade and developing countries.
• NCERT's equity critique still matters: anger over uneven gains from globalisation fuels protectionism. The answer is fair globalisation: skilling, social safety nets and MSME integration. Closing borders is not the answer.