Global Economic Shift – New Paradigms and India’s Role

The global economic order is undergoing a deep transformation in 2025. The United States and China are engaged in a great-power rivalry, reshaping trade, finance, and geopolitics. This shift challenges the long-standing neoliberal consensus and opens possibilities for a more equitable world order. India and other Global South nations face critical choices to navigate and influence this emerging landscape.

Populist-Autocracy and State Capitalism

Populist-autocrats have created a new state-capital nexus. Unlike traditional laissez-faire capitalism, these regimes favour large oligopolies and crony capitalists. Governments prioritise corporate interests over citizens. This distorts national policies and weakens the social contract. The result is a plutocratic system where public assets are mortgaged for political gain.

Geopolitical Recalibration by the United States

The U.S. is reversing decades of economic and strategic convergence. It pushes to relocate critical industries like semiconductor manufacturing back home. It secures trade routes such as the Panama Canal and strengthens supply chains for rare earth minerals. America’s digital-currency diplomacy and Arctic ambitions reflect a new form of ecological imperialism. It pressures allies to manage regional conflicts, intensifying global tensions and conflicts.

Impact of Big Tech and Digital Colonialism

Big Tech firms and cloud capitalists dominate the global economy by extracting value along the supply chain. They influence politics and public opinion, often empowering populist-autocrats who undermine digital rights. Emerging digital financial systems, including state-backed digital currencies, threaten national economic sovereignty. These innovations complicate anti-money laundering efforts and political financing, favouring authoritarian regimes.

Withdrawal of Development Aid and Its Consequences

Populist-led states have cut developmental aid drastically. G-7 funding reductions risk pushing millions in Africa and Asia into deeper poverty. Reduced aid to small enterprises triggers mass migration and political instability. Cuts to humanitarian programmes like the World Food Programme increase conflict risks and forced displacement, especially in fragile regions like the Sahel.

Trade Barriers and the Global South’s Response

The U.S. imposes tariffs and sanctions on numerous countries, disrupting free trade and capital flows. It limits imports from surplus economies, including Japan, Europe, and China. In response, the Global South explores alternatives such as bilateral treaties, localisation of production, supply chain security, and de-dollarisation. These efforts may inspire the West to reconsider its economic strategies.

India and the Global South’s Opportunity

India and China, historically dominant economies, can lead a New Economic Deal. Current neoliberal globalisation has caused debt crises, inequality, and environmental harm. India must advocate reform in international financial institutions and push for debt relief to protect democracy. Strengthening South-South alliances and fair trade policies will support domestic industries and sovereignty.

Domestic Recalibration for National Development

India needs a strategic shift in governance. The state must lead in critical sectors such as energy, infrastructure, defence, health, and education. Anti-monopoly laws and sovereign wealth funds can prevent oligopoly dominance. Investing in scientific research and public sector units will enhance competitiveness and geopolitical influence. Digital finance must align with constitutional goals, ensuring sovereignty and fairness.

Foreign Policy and National Consensus

India’s foreign policy should prioritise substantive engagement and non-alignment, avoiding partisan shifts. Building bipartisan consensus on national goals is vital. This approach will help India capitalise on global disruptions and secure its rightful place in the evolving world order.

Questions for UPSC:

1. Critically discuss the impact of populist-autocracy on global economic governance and national social contracts.
2. Analyse the strategic implications of the United States’ economic recalibration for global trade and security. With examples, discuss how this affects emerging economies.
3. Examine the role of digital currencies and Big Tech in reshaping economic sovereignty. How can nations safeguard their interests in this context?
4. Discuss in the light of recent trends, the challenges and opportunities for the Global South in creating a fairer international economic order. Taking examples from India and China, analyse possible pathways.

Answer Hints:

1. Critically discuss the impact of populist-autocracy on global economic governance and national social contracts.

1. Populist-autocrats prioritize oligopolies and crony-capitalists, sidelining citizen welfare and distorting policies.
2. State-capital nexus leads to mortgaging public assets for political gains, weakening the social contract.
3. This governance model undermines laissez-faire capitalism by increasing state intervention favoring elites.
4. Such regimes erode democratic norms and exacerbate socio-economic inequalities globally.
5. Populist-autocracy fuels undemocratic upsurges and weakens multilateral economic institutions.
6. Withdrawal of development aid under populist-led states aggravates poverty and political instability.

2. Analyse the strategic implications of the United States’ economic recalibration for global trade and security. With examples, discuss how this affects emerging economies.

1. U.S. aims to relocate critical industries (e.g., semiconductor manufacturing) back home to secure supply chains.
2. Secures strategic trade routes (e.g., Panama Canal) and rare earth mineral supply lines to counter China’s influence.
3. Pushes digital currency diplomacy and exerts pressure on allies to manage regional conflicts, increasing geopolitical tensions.
4. Imposes tariffs and sanctions disrupting free trade, impacting surplus economies and emerging markets’ export opportunities.
5. Emerging economies face supply chain disruptions and must seek alternatives like local production and bilateral treaties.
6. U.S. recalibration accelerates Global South’s de-dollarisation and diversification of economic partnerships.

3. Examine the role of digital currencies and Big Tech in reshaping economic sovereignty. How can nations safeguard their interests in this context?

1. Big Tech extracts rents from value chains, influences politics, and empowers populist-autocrats undermining digital rights.
2. State-backed digital currencies pilot cross-border financial systems but risk undermining national economic sovereignty.
3. Digital colonialism through AI plans, Cloud Act, and SWIFT weaponisation complicates anti-money laundering and political funding.
4. Nations must strengthen regulatory frameworks to protect data sovereignty and digital rights.
5. Develop sovereign digital currencies aligned with constitutional and national goals to retain control.
6. Invest in domestic technological capabilities and encourage international cooperation on digital governance norms.

4. Discuss in the light of recent trends, the challenges and opportunities for the Global South in creating a fairer international economic order. Taking examples from India and China, analyse possible pathways.

1. Challenges include rising poverty, inequality, withdrawal of development aid, and geopolitical pressures from great-power rivalries.
2. Opportunities arise from shifting global order, allowing India and China to lead a New Economic Deal focused on equity.
3. India must push for reform in international financial institutions for fairer representation and debt relief frameworks.
4. Strengthening South-South alliances (BRICS, bilateral treaties) can enhance collective bargaining and fair trade policies.
5. Domestic recalibration with state-led development in critical sectors and anti-monopoly measures can boost sovereignty.
6. Non-aligned, bipartisan foreign policy approach enables stable partnerships and maximizes geopolitical influence.