Is India prepared for the end of globalisation?

Why in the News? 

Recently, Donald Trump linking tariffs with India’s geopolitical and trade behaviour – including comments on Russian oil imports -signals a shift from rules-based multilateral trade toward hard-bargaining bilateralism and economic nationalism. Analysts increasingly argue that the post-Cold War model of liberal globalisation is weakening and a mercantilist order is emerging. This raises a critical policy question: Is India prepared for a world where globalisation no longer guarantees open markets and cooperative institutions?

Background: What Was Globalisation?

Globalisation was not merely about free trade, it was a political–economic order built on:

• Multilateral institutions such as the World Trade Organisation
• Norms of open markets and contract enforcement
• Free flow of capital (though not labour)
• Global supply chains
• Rules-based dispute resolution
• Legitimacy rooted in liberal democracy and cooperation

Historical Phases

• Colonial globalisation -coercive, extractive, unequal
• Post–World War II order – institutional, rules-based
• Post–Cold War globalisation – liberalised trade + financial integration

This system helped reduce poverty and expand markets – but also created deep structural imbalances.

Features 

Shift from Multilateralism to Mercantilism

• Trade is increasingly seen as a tool of state power
• Surpluses = strength; deficits = vulnerability
• Bilateral deals replace multilateral rules
• Sanctions and tariffs as negotiation tools

Strategic Trade and Industrial Policy

• Countries promoting domestic manufacturing
• Supply chain reshoring / friend-shoring
• Technology controls and export restrictions

Sovereignty Over Liberal Norms

• Migration restrictions
• Strategic capital controls
• Security-first trade policies

Unintended Consequences of Globalisation

Inequality and Wage Stagnation

• Returns to capital outpaced wage growth
• Manufacturing shifted geographically
• Regional job losses in advanced economies
• Rise of populist politics

Rise of China as a System Challenger

• China integrated into global markets without fully liberalising politically.
• Maintained state control over capital and information
• Built massive trade surpluses and industrial capacity
• Created an alternative development model
• Constrained industrialisation space for countries like India

India’s Position in a Post-Globalisation World

India faces a paradox:

• Too large to ignore, too underdeveloped to dominate

Structural Constraints

• Incomplete demographic dividend conversion
• Low manufacturing share in GDP
• Skewed income distribution
• Weak human capital base
• Uneven state capacity
• Informal labour dominance

Missed Opportunities (Last 15 Years)

• Limited public investment in health and education
• Manufacturing push not broad-based
• Labour-intensive sectors underdeveloped
• Social sector spending remains inadequate relative to need

Features

Digital Public Infrastructure (DPI)

• Aadhaar, UPI, DigiLocker stack
• Low-cost, scalable governance platforms
• Exportable governance model

Services Sector Strength

• IT and knowledge services
• Remote work economy
• Global capability centres

Renewable Energy Potential

• Solar and green hydrogen push
• Large domestic market
• Policy momentum

Democratic Decentralisation

• Panchayati Raj and local governance
• Potential for bottom-up development if strengthened
• Challenges for India in the End of Globalisation Scenario

Economic Challenges

• Export-led growth becomes harder
• Supply chain fragmentation
• Tariff barriers and geo-economic blocs
• Technology restrictions

Institutional Challenges

• Low administrative capacity
• Regulatory unpredictability
• Contract enforcement delays
• Weak local government capacity

Social Challenges

• Youth unemployment
• Skills mismatch
• Inequality-driven instability
• Weak social safety nets

Geopolitical Challenges

• Reduced multilateral negotiation platforms
• Climate finance uncertainty
• Conditional development aid
• Hard-power trade diplomacy

Way Forward: How India Should Prepare

Build State Capacity

• Civil service and regulatory reform
• Faster judicial and contract enforcement
• Data-driven governance
• Professionalised economic administration

Invest in Human Capital

• Universal quality school education
• Public health expansion
• Skill-linked vocational training
• Nutrition and early childhood investment

Strategic Industrial Policy

• Focus on 4–5 priority sectors:
• Electronics
• Clean energy
• Defence manufacturing
• Semiconductors (selectively)
• Agro-processing
• Link PLI-type incentives to productivity and exports.

Domestic Demand Strengthening

• Raise mass purchasing power
• Rural income growth
• Urban employment programs
• MSME competitiveness

Trade Strategy Reset

• More bilateral trade agreements
• Regional value chain integration
• South–South partnerships
• Targeted export clusters

Social Cohesion and Social Contract

• Reduce inequality
• Expand social protection
• Cooperative federalism
• Trust-based governance

Conclusion

The liberal, rules-based era of globalisation is under strain, replaced by a more transactional and mercantilist order. For India, this is both a risk and an opportunity. Without stronger state capacity, human capital investment, and inclusive growth, India risks long-term marginalisation.