India has skin in the game: A call for foreign policy beyond free-riding

After World War II, we went through two phases. First, there was the Cold War with an emphasis on nuclear deterrence coupled with controlled wars. After the collapse of the Union of Soviet Socialist Republics, there were wars in anarchic conditions such as Afghanistan, Iraq, and Syria.

 

Through all these years, the basic machinery of the world economy worked well. Most G20 countries faced a relatively stable environment. The “second globalisation”, which began in about 1982, featured a great wave of removal of government restrictions on trade, capital, and labour movements. 

The connection between global conditions and Indian economics is often underrated: We tend to tell purely Indian stories about Indian growth episodes such as 1979-1989 and 1991-2011. But the influences of the world, and of global peace, have been strong. India has been a huge beneficiary of globalisation. In 2023-24, India got $441 billion by exporting goods and $341 billion by exporting services. These are vast gains compared with the picayune conditions of 1991. India needs a sensible external environment to continue to obtain the gains from globalisation, as a defensive strategy (to protect the 2023-24 exports) and an offensive strategy (to support the next doubling of exports). 

The Indian economy suffered from the oil shock of 1973, which followed the Yom Kippur war. The “great moderation” is the period of 1985-2008, where advanced economies did rather well through the adoption of sound macroeconomic policy (ie floating exchange rates and inflation targeting). This period worked well for India, with the exception of Iraq’s invasion of Kuwait, which triggered the Indian balance of payments crisis. 

We are now facing a new daunting environment in terms of global security. Global conflicts have become significantly worse. Russia’s invasion of Ukraine is the biggest conventional war since 1945. It is a remarkable return to “total war” — the complete mobilisation of a society to wage war — which was last seen in World War II. The conflict involving Iran and Israel is simmering, and could escalate. Free navigation in the Red Sea — which has immense importance for Indian trade — has been compromised in an unprecedented way by the Houthis, armed by Iran. China continues to escalate its military pressure upon Taiwan. 

A great wild card in this is the possibility of a Donald Trump victory in November. This could be associated with greater American isolationism, lower American state capability, and more corrupt, personalised decision making. Many things on the global stage that are held together by American power will respond to a Trump victory in surprising ways. Strongmen like Xi Jinping and Vladimir Putin will matter more, worldwide, if Mr Trump wins. 

During 2018-24, we saw the emergence of “the third globalisation”, where access to the core is more predicated on foreign policy and military alignment with the core. This has, of course, constituted a more limited environment when compared with the second globalisation, where there was high freedom for cross-border activities. Looking forward, new kinds of military conflicts would kick off new aspects in this retreat from globalisation. This would, in turn, create a drag upon global growth. 

There is thus a more difficult global environment in which the growth of export or gross domestic product (GDP) is sought. Even though Indian foreign policy tried to resist Pax Americana in many aspects from 1989 till this day, the project of Indian growth greatly benefited from the American-led world order. Conversely, greater global chaos with the return to total war in more countries gives an environment of conflict in which trade and GDP will fare more poorly. This will harm Indian growth. 

How can Indian foreign policy be optimised in this environment? Traditionally Indian foreign policy has not participated much in the global projects of peace and economic growth, being content to free ride on the work done by others, and to devote capital to narrow bilateral issues such as Khalistani activities in Canada. 

The Indian interests, however, are linked to sustained high economic growth in India. The most important priority for foreign policy is to find the strategic pathways, in this difficult global context, which help create the harmonious global environment that could best support Indian growth. 

By this reasoning, the global flashpoints (Ukraine, Taiwan, and the Red Sea) should be sites of action for the Indian state. The post-1991 Indian growth trajectory, and Indian economic growth that harnessed access to the advanced economies on issues of technology, finance, management and markets, makes India a status quo power on these conflicts. To the extent that India can help global negotiations which restore the status quo ante, this will assist India's interests. 

Indian foreign policy needs to thus become a participant and supporter of the projects of global peace and globalisation. We can no longer count on the West to adequately deliver these foundations for us to free ride upon. Every advanced economy other than the United States (US) is right now thinking about this problem. It would be natural for India to participate in these tasks by making bilateral negotiations fit within the overall strategy of fostering a successful world economy. This would require thinking beyond traditional ideas like non-alignment or strategic autonomy. All the major economies of the world other than Russia, China, and the US see eye to eye on this. This may hence be an area for a new outburst by India in collaborative work with many countries on these questions. 

A key part of this project is the emerging rules of the “third globalisation”. India has an interest in evolving the “third globalisation” into a true globalisation within the core while cutting off strategic rivals like China. 

Such participation in improving the global environment will require reshaping domestic policy in many respects, seeking to remove behaviour by the Indian state which is incompatible with the desired global movements towards a stable and successful security and economic environment. 

The writer is a researcher at XKDR Forum