Simply put, geoeconomics is the use of economic tools for national security, and in the case of China and the United States (US), even global dominance. The problem is that the tools meant to create value are quite poor at either providing security or ensuring economic dominance. They are difficult to target well, and impossible to contain. What is worse about them is their tendency to harm the user as well as the target.
Donald Trump, for all his self-stated successes, is finding it difficult to satisfy his own electorate because of the inflationary conditions his policies have unleashed. So is Xi Jinping, as his untimely assertion of Chinese dominance has led to many countries, India included, to tighten trade and investment; what China needs most today is global markets, and what its policies have deprived it of most is precisely the markets it needs.
What is true of Mr Trump and Mr Xi and their need to dominate, is also true for the smaller powers that will need to use similar tools to protect themselves. Poor use of industrial policy and suchlike can potentially cause significant damage to the same economy we seek to promote. There are multiple such examples globally. India’s own pre-1991 experience is replete with examples of how large infusions of government resources yielded little apart from fiscal stress.
Despite such obvious potential damage, it is believed by many that geoeconomics can yield great opportunities for India. And they are not entirely wrong either. There are many current and emerging possibilities where India could use tactical economic tools to create greater livelihoods and welfare, while also achieving geopolitical goals. But to do that, India needs to have a coherent vision with buy-ins from multiple stakeholders within the government and outside.
In other words, the time is now ripe for India to have an Economic Security Strategy. But unlike typical security doctrines whose objectives are security and influence, the one on economic security for India should be about achieving the same security while creating greater well-being for all. The difference is important. If livelihood and well-being are not explicitly incorporated in such a doctrine, the danger is that security objectives may suck out an inordinately high share of the resources and effort. They may achieve security but at great long-term costs to the development process. For there can be no doubt that there are serious multi-domain security needs, and these are likely only to grow.
Therefore, we need to work harder on two fronts. First, find those common elements where security and well-being objectives meet. Let us take biofuels as an example. Biofuels from India’s farms can ensure greater energy security and may also yield income to farmers. However, if they consume or replace food, they will only lead to food security being undermined. A policy that seeks to promote low-cost biofuel options from agriculture waste can help achieve both objectives. However, such low-cost agricultural waste options will initially need greater research and development (R&D), different types of infrastructure, and a supply chain aligned with environmental objectives, among other things.
Second, India’s economic security objectives will best be met when domains work together. Specific choke points where action is required include a range of points and domains, including supply chain nodes, critical infrastructure, data cables and pipelines, etc. The interdepartmental coordination required within the government is quite obvious. Diplomacy will also need to enhance its role in building global partnerships and new types of cooperative economic arrangements. The recent successes with bilateral free-trade agreements (FTAs) is a case in point.
India is already using a surfeit of tools to secure and protect itself. Some current and potential tools include trade policy measures such as tariffs, export controls, FTAs; selective investment controls; dual use technology limitations; and industrial policy favouring some segments. To this, we will need to add a comprehensive R&D framework with far greater resources and very specific asks from the R&D establishments, greater selective competition, especially in domains where India aspires for global leadership.
In other words, the more India seeks to achieve and the greater the need for geopolitical advantages, the greater the economy-wide coordination that is required. The proposed Economic Security Strategy talks to precisely such a need, because it makes public a common frame for different entities to coordinate.
Going forward, economic prosperity will be far more intimately tied to security than it was in the past. But increasing security needs should not be at the cost of efficiency and productivity. It is, therefore, important for India to develop an economic security doctrine that seeks to achieve both objectives.
The author heads the Centre for Social and Economic Progress. The views are personal
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