Font size:
Print
India’s Geoeconomic Playbook in 2025: Navigating the Complexities of a Fragmented Global Economy
Context:
With Donald Trump’s return to the US presidency, 2025 marks a pivotal juncture for global economic realignments amidst heightened protectionism and supply chain disruptions. Subdued global growth projections, at just 2.8% as per the United Nations, further exacerbate economic challenges.
Background: Key Aspects of Trump’s First-Term Policies and Their Impact on India
- Trade Restriction Policies
- Imposed tariffs on key imports, creating barriers for global trade.
- Affected sectors like textiles, pharmaceuticals, and IT services that contribute significantly to India’s GDP.
- Aggressive Stance Against China
- Trade wars initiated by Trump’s administration disrupted global supply chains.
- India faced challenges from redirected trade flows but also found opportunities to position itself as an alternative hub.
Possible Resurgence of Global Trade Protectionism Under Trump 2.0
- “America First” policies signal a renewed focus on protecting domestic industries at the expense of global trade liberalization.
- Tightened visa regulations and trade barriers are anticipated, impacting industries reliant on the US market.
- Heightened tariffs and stricter regulations are likely to discourage foreign manufacturing and service providers.
Ripple Effects of the US-China Trade Wars on Global Markets
- Increased volatility in international markets due to disrupted supply chains.
- Investors’ confidence undermined by prolonged uncertainties.
- Opportunities arose for nations like India to fill supply chain gaps.
Challenges for the Indian Economy in the Global Context
- Vulnerability to global capital outflows driven by a stronger US dollar.
- Risk of being overshadowed by China’s entrenched position in global trade.
- Economic fragmentation due to geopolitical tensions and sluggish growth.
Opportunities and Challenges for India
- Opportunities
- India’s potential to emerge as a manufacturing hub under the China Plus One strategy.
- Increased foreign investments in high-value industries such as electronics and pharmaceuticals.
- Challenges
- Sluggish global economic growth could undermine diversification efforts.
- China’s dominant position in global supply chains remains a significant obstacle.
Steps Taken by the Indian Government to Attract Global Manufacturers
- Production-Linked Incentive (PLI) Schemes:
- $25 billion allocated across 13 key sectors, including electronics, automobiles, and pharmaceuticals.
- Encouraged global giants like Apple, Foxconn, and Samsung to expand operations in India.
- Atmanirbhar Bharat Initiative: Emphasis on self-reliance to boost domestic manufacturing.
India’s Competitive Drivers in the Global Manufacturing Market
- Availability of a skilled labor force and a growing startup ecosystem.
- Technological advancements in emerging fields like artificial intelligence and blockchain.
- Strong governmental support for infrastructure development and ease of doing business.
The Need for India to Diversify in a Fragmented Global Market
- A potential US-China rapprochement could marginalize India’s position in supply chains.
- Diversification reduces dependency on single markets, ensuring economic resilience.
- Enhancing trade ties with emerging markets mitigates risks of global protectionism.
Strategies for Market Diversification
- Leveraging BRICS Plus
- Expansion of BRICS to include energy producers like the UAE and resource-rich nations like Iran.
- Provides India with greater access to critical resources and equitable governance platforms.
- Strengthening Trade Agreements with Southeast Asia, Africa, and Europe
- Partnerships with Africa and ASEAN to tap into growing consumer markets.
- The India-EU Trade and Technology Council fosters cooperation in digital trade and emerging technologies.
Government Initiatives to Enhance India’s Role in Global Trade
- India-EU Trade and Technology Council: Strengthens collaboration in technology and trade.
- Indo-Pacific Economic Framework (IPEF): Reinforces economic partnerships in the Indo-Pacific region.
- BRICS Plus Engagement: Positions India as a key player in global economic governance.
