A new world in the making: Is it time to rethink India's economic strategy?

The US is home to massive and world-dominating private tech companies, such as Google, Microsoft, Amazon, OpenAI, Meta, and Apple, yet the country as a whole is struggling neck-deep in debt

“Sir, please don’t say this openly … we will lose half our revenue if our key clients hear that!” This was the anguished response from a friend who had started a software company in the 1990s, when I suggested that I could help design an algorithm to perform marketing analysis in one-tenth the time it was taking at that time. His business was then to conduct marketing analysis, a service that his company provided to blue-chip clients in India and the United States (US). His revenue was generated by charging clients in accordance with the number of hours spent by his team on this analysis, as well as the number of people employed to perform it. 

This incident from a time nearly three decades ago comes rushing to my mind, in effect telling me that banking on cheap Indian labour, which I had apprehensions about even in the 1990s, may soon come to haunt us and more so when I see the current headlines flooding the world media: 

“More than 130,000 IT employees have lost their jobs so far this year as the tech industry continues to lay off workers”.

Or, more shocking to me, “Work for designers and photographers in their 30s drying up...” 

 Then, when I dig a little deeper, I am led to believe that these problems in India seem to originate in problems with the US economy: 

“The US could run short of money to pay its bills by August this year…” 

When I see these reports about the US situation stating that the US spends more than it collects in taxes and, to cover the gap, the government borrows money through treasury bonds and then the cumulative borrowing over decades has resulted in its national debt exceeding $34 trillion as of early 2025, I can’t help but feel shaken. 

The US is home to massive and world-dominating private tech companies, such as Google (Alphabet), Microsoft, Amazon, OpenAI (ChatGPT), Meta, and Apple, yet the country as a whole is struggling neck-deep in debt. The simple answer often given is that these giants are private corporations, not government-owned, and their profits are all distributed to shareholders, founders, and executives. The US government receives almost no share in these profits in the form of taxes. So, while these companies are American and lead the world in innovation, this does not translate into government revenue. 

This is a puzzle that all deep thinkers in the US and around the world are trying to solve, primarily because if the present trend of deficits in the US continues and, God forbid, leads to a debt default by the US, the world will be thrown into chaos. Countries like China, Japan, the United Kingdom, India, and Saudi Arabia hold their reserves in US dollars, and a US default would result in losses on those holdings and panic in currency markets. It could also lead to supply-chain disruption, resulting in a crash in US demand and a reduction in global exports, particularly in Asia. It would also mean that tech orders, services outsourcing, and raw material imports all take a hit, affecting the export revenue of many countries. For India, this could potentially be a catastrophic decline in IT (information technology) outsourcing revenue from the US. 

Since I couldn’t find any intelligent explanation in the mass media about all this, I dived headfirst into any possible book that could unravel this puzzle for me, and I thought I’d share some of my findings with you, dear reader. 

Several books analyse the possibilities and effects of such an event. The Storm Before the Calm, by George Friedman, which predicts internal US economic and institutional upheaval in the 2020s, potentially affecting global stability, and The End of the Dollar Empire, by John Perkins, which explores what happens when the dollar loses its dominance, are two prominent examples. Some other books also list and analyse how India can potentially deal with such an event. The Future is Asian, by Parag Khanna (it suggests India should do more regional integration and move towards supply-chain leadership and economic diplomacy beyond Western dependencies), and India in the Age of Ideas, by Sanjeev Sanyal (it gives an insider’s view into how Indian policymaking is adapting in this era of global uncertainty) are two. 

Then, there is at least one book that deals specifically with what India, in particular, can or should do. This is Breaking the Mould: Reimagining India's Economic Future, by Raghuram Rajan and Rohit Lamba. It proposes a new growth path for India, based on encouraging decentralised, grassroots-driven innovation, which can be achieved by building an ecosystem suited for small and medium enterprises (SMEs). Support this effort by investing in education and skills rather than subsidising capital-heavy industries. In addressing the emerging fragile global world order, the book cautions against relying too heavily on exports, as China does. This is because they argue that in the emerging world, Western markets, such as the US, will become increasingly protectionist. You can see that, while this book was published last year, before Donald Trump was re-elected US President, Mr Trump’s key actions have all centred around protectionism: Increasing import duties for goods coming to the US and demanding reductions in import duties by other countries on goods from America.

 

India, these authors say, should be a “creative country”, “build from the bottom up to become shock-proof, not just chase big-ticket industrial dreams that may be vulnerable to global shifts”, and focus on “India’s services edge, digital stack, and human capital, which are exactly the kind of assets that become valuable in a post-dollar or post-US-hegemony world”!

Is it time for a radical rethink of India’s economic strategies and prepare for this new world coming? 

The author (ajitb@rediffmail.com) is devoting his life to unravelling the connections between technology and society