Is India prepared for the end of globalisation?

UPSC Study Note: Is India Prepared for the End of Globalisation?

1. At a Glance

• Deglobalisation refers to the unwinding of the post-1990s liberal international economic order — characterised by free trade, multilateral institutions, and integrated supply chains — and its replacement by mercantilism, protectionism, and transactional bilateralism. [S1]
• India, as the world's fifth-largest economy and a major trading nation, faces acute exposure: its export competitiveness, FDI inflows, diaspora remittances, and technology access are all embedded in the globalised order now fracturing. [S2]
• UPSC relevance is high and cross-cutting: GS-II (international relations), GS-III (Indian economy, trade, infrastructure), and Essay paper (civilisational themes, India's global role).
• The central question — whether India has the state capacity, institutional depth, and social contract to navigate a world of managed trade blocs — is a live policy debate as of 2026. [S1]

2. Why in the News

• January 2026: U.S. President Donald Trump publicly claimed India had reduced Russian oil imports to "make him happy" and threatened additional tariffs if India "displeases" him — framing bilateral trade as personal leverage rather than rules-based engagement. [S1]
• The remarks encapsulate the broader shift: the WTO dispute-settlement system is functionally paralysed (Appellate Body non-functional since 2019), and the U.S. has pivoted to unilateral tariff tools. [S3]
• WTO Global Trade Outlook (March 2026) flagged that FDI in tariff-exposed and global value chain-intensive sectors (textiles, electronics, machinery) is projected to fall by 25% — sectors central to India's Make in India and PLI ambitions. [S3]
• The January 30, 2026 Hindu BusinessLine commentary by Suvojit Chattopadhyay framed India's preparedness deficit across three axes: state capability, social cohesion, and equitable growth distribution. [S1]

3. Background & Evolution

• Predecessor concept: Washington Consensus (1989) — IMF/World Bank prescription of fiscal discipline, privatisation, trade liberalisation — was the policy backbone of the globalisation era.

4. Core Static Facts

Definitional clarifications: - Globalisation (fuller definition): Not merely free trade in goods/services, but a political system governing how states run markets, engage with each other, and operate through networked multilateral institutions — associated with liberalism, democracy, and cooperative norms. [S1] - Mercantilism: Trade as an instrument of state power; surpluses = strength; deficits = weakness. The framework now re-emerging under Trump-era U.S. policy. [S1] - Friend-shoring: Restructuring supply chains to favour geopolitically aligned partners (U.S. policy term post-2022). - PLI (Production Linked Incentive): India's domestic manufacturing-push scheme across 14 sectors — designed to reduce import dependence and build export capacity.

Key institutions and India's membership:

Trade exposure (WTO data): - India's Most Favoured Nation (MFN) applied tariff is among the highest of major economies — average ~15% on non-agricultural goods — making it vulnerable to reciprocal tariff escalation. [S2] - FDI in GVC-intensive sectors projected to fall 25% globally in 2025 per WTO Global Trade Outlook March 2026. [S3] - India's goods exports ~$440 bn (FY 2023-24); services exports ~$340 bn — both embedded in liberal-order infrastructure (SWIFT, dollar settlement, open logistics).

5. Multi-Dimensional Analysis

Economic

• India's export basket (petroleum products, gems & jewellery, pharma, textiles, IT services) is deeply globalisation-dependent; a fragmented world creates market access uncertainty. [S1]
• The dollar dominance of trade finance means INR internationalisation efforts (RBI's rupee trade settlement framework, 2022) remain embryonic — India cannot easily route around dollar-centric systems.
• GVC participation is shallow: India captures labour-intensive segments, not high-value design/IP nodes; deglobalisation could strand this limited integration without offering domestic alternatives.
• A 25% projected decline in FDI in tariff-exposed GVC sectors [S3] directly threatens PLI scheme targets and the "China+1" opportunity India was banking on.

Geopolitical / Strategic

• Trump's framing of India-Russia oil trade as a bilateral favour signals India's strategic autonomy is increasingly costly — large powers now demand alignment, not just non-alignment. [S1]
• India's Act East Policy and membership of Quad, I2U2 (India-Israel-UAE-U.S.), and IPEF (Indo-Pacific Economic Framework) position it across competing blocs without deep institutionalisation in any.
• Return to mercantilism favours large continental economies (U.S., China, EU) that can sustain autarky; India's market size (~1.4 bn) is an asset but institutional capacity to leverage it is untested at scale. [S1]
• India's withdrawal from RCEP (2019) shielded domestic industry short-term but foreclosed deep Asia-Pacific supply-chain integration — a strategic cost now becoming visible.

Administrative / State Capacity

• The article explicitly identifies weak state capability as India's core vulnerability: without it, neither export-push nor import-substitution can be executed effectively. [S1]
• India's logistics performance (LPI World Bank rank: 38/139 in 2023) and ease of doing business gaps mean cost competitiveness erodes even when tariff opportunities arise.
• Centre-State coordination deficits in land acquisition, labour law harmonisation, and industrial infrastructure undermine manufacturing scale-up needed for a deglobalised world.

Social

• Globalisation's gains in India have been unequally distributed: urban IT/services workers benefited disproportionately; agricultural and informal-sector workers remain outside the dividend. [S1]
• The article warns that without a social contract committed to sharing growth more evenly, India risks political instability that undermines the long-term state-building required. [S1]
• Jobless growth — high GDP growth with inadequate formal employment generation — means India cannot absorb its demographic dividend without the labour-intensive manufacturing that GVC integration was meant to catalyse.

Historical

• Early globalisation was built on force and extraction — the industrialised north accumulated wealth through domestic exploitation and overseas resource extraction; trade was lopsided, not free. [S1]
• India was itself a victim of colonial mercantilism (deindustrialisation of textiles, drain of wealth) — making the current return to mercantilist norms geopolitically ironic and historically resonant.
• Post-1991 India internalised the Washington Consensus without fully building the developmental state institutions (Korea, Japan, China model) that make countries resilient when the consensus collapses.

Ethical / Governance

• Aspiring to be Vishwaguru ("World Teacher") without institutional foundations and economic means to deliver it is identified as a governance credibility risk. [S1]
• Crony capitalism and weak regulatory independence mean that protectionism in a deglobalised world could entrench rent-seeking rather than building genuine industrial capability.

6. Recent Developments (last 12–18 months)

• January 2026: Trump claims India reduced Russian oil imports as a "favour" to him; threatens further tariffs — signals bilateral transactionalism replacing rules-based trade. [S1]
• March 2026: WTO Global Trade Outlook flags 25% projected decline in FDI for GVC-intensive/tariff-exposed sectors; global trade growth revised downward. [S3]
• 2025: U.S. imposes broad tariff packages under Section 232/301 authorities; India faces potential exposure on pharma, gems, IT hardware exports.
• 2025: India-UK Free Trade Agreement negotiations advance (as of mid-2025) — bilateral FTA strategy as hedge against multilateral collapse.
• 2024–25: India's PLI scheme disbursal picks up in electronics, mobile phones (Apple supply-chain shift to India); but scale remains limited vs. China.
• 2025: RBI's rupee trade settlement framework expands to 22 countries — early-stage attempt at reducing dollar dependence. [S4]
• 2024: India's goods trade deficit widens; China remains top import source (~$100 bn+) — structural vulnerability in a decoupling world.

7. Prelims Hooks

1. India became a WTO member on 1 January 1995 — also the year WTO replaced GATT. [S2]
2. India was a founding signatory of GATT in 1947 — predates WTO by 48 years.
3. India withdrew from RCEP negotiations in November 2019 — the only ASEAN+ partner to do so.
4. GATT (General Agreement on Tariffs and Trade) was established in 1947; replaced by WTO in 1995.
5. WTO's Appellate Body has been non-functional since December 2019 due to U.S. blocking of new appointments — key paralysis in multilateral trade dispute resolution.
6. FDI in GVC-intensive sectors is projected to decline by 25% globally in 2025, per WTO Global Trade Outlook March 2026. [S3]
7. Mercantilism views trade surpluses as national strength and deficits as weakness — the framework now associated with Trump-era U.S. trade policy. [S1]
8. India's PLI scheme covers 14 sectors — launched from 2020 onwards under Ministry of Commerce & Industry / respective sectoral ministries.
9. The Washington Consensus (1989) — coined by economist John Williamson — prescribed fiscal discipline, privatisation, and trade liberalisation as development policy.
10. I2U2 grouping (India, Israel, UAE, U.S.) was launched in July 2022 — focuses on investment in food, energy, health, space, transport, water.
11. India's MFN applied tariff on non-agricultural goods averages ~15% — among the highest of major economies, per WTO Tariff Profiles 2025. [S2]
12. Bretton Woods institutions (IMF + World Bank) were established in 1944 at Bretton Woods, New Hampshire, USA.
13. Friend-shoring is a U.S. policy concept (articulated by Treasury Secretary Yellen, 2022) of reshoring supply chains to geopolitical allies.
14. India's Act East Policy replaced the Look East Policy in November 2014 at the ASEAN-India Summit in Myanmar.

8. Mains Relevance

GS Papers: - GS-II: International relations — India's foreign policy in a multipolar/post-globalisation world; bilateral vs. multilateral frameworks; WTO and India. - GS-III: Indian economy — trade policy, export competitiveness, PLI, FDI, supply-chain integration; impact of global economic shifts on India. - Essay Paper: "India at the crossroads of globalisation and nationalism"; "Vishwaguru aspirations vs. institutional realities."

Syllabus headings: - GS-II: Effect of policies and politics of developed and developing countries on India's interests; Important international institutions, agencies and fora. - GS-III: Indian Economy and issues relating to planning, mobilisation of resources, growth, development and employment; Effects of liberalisation on the economy.

Plausible Mains question stems: 1. "Globalisation is a political system, not merely an economic arrangement. In light of its apparent unravelling, critically assess India's preparedness to navigate a mercantilist world order." (GS-III / Essay) 2. "India's withdrawal from RCEP was strategically prudent in 2019 but has left it exposed as global supply chains fragment. Evaluate." (GS-II / GS-III) 3. "Without robust state capacity, social cohesion, and equitable growth, India's ambition to be Vishwaguru in a post-globalisation world remains aspirational. Discuss." (GS-II / Essay)

9. Related Topics to Study Next

10. Common Errors / Trap Areas

1. Confusing GATT with WTO: GATT (1947) was a treaty, not an organisation; the WTO (1995) is the organisation with legal personality. India was a GATT contracting party, not a GATT "member."

2. Assuming India's LPG reforms = full globalisation buy-in: India liberalised selectively — it retained high tariff walls, resisted RCEP, and never opened agriculture fully to WTO disciplines. India was always a partial globaliser.

3. Conflating deglobalisation with autarky: Deglobalisation does not mean zero trade; it means the shift from rules-based multilateralism to managed/bilateral/bloc-based trade. India must navigate managed trade, not self-sufficiency.

4. Misattributing "Washington Consensus": Coined by economist John Williamson in 1989 — NOT a U.S. government policy document. Do not call it a "treaty" or "agreement."

5. Overstating PLI as a complete answer: PLI is an incentive scheme, not a structural industrial policy. It addresses investment attraction but not logistics gaps, skills deficits, or regulatory bottlenecks — the deeper state-capacity issues the article flags. [S1]

11. Sources

• [S1] Suvojit Chattopadhyay, "Is India prepared for the end of globalisation?" — The Hindu BusinessLine, 30 January 2026, Page 8 International Print Edition — (Tier 4; article excerpt as primary source) https://www.thehindu.com/todays-paper/2026-01-30/th_international/articleG4FFGP7S3-13290593.ece

• [S2] WTO | India — Member Information & Tariff Profiles 2025 — (Tier 2) https://www.wto.org/english/thewto_e/countries_e/india_e.htm https://www.wto.org/english/res_e/publications_e/world_tariff_profiles25_e.htm

• [S3] WTO Global Trade Outlook and Statistics — March 2026 — (Tier 2) https://www.wto.org/english/res_e/booksp_e/gtos0326_e.pdf

• [S4] RBI Rupee Trade Settlement — referenced via general knowledge corroborated by RBI policy communications — (Tier 1 background) https://rbi.org.in