The Covid-19 pandemic has brought to the fore India’s capabilities and the need for more domestic production over unregulated globalization. The External Affairs Minister of India (EAM) asserted this during a recent Global Technology summit. He emphasized that to stimulate tech growth, nations must encourage the creation of more start-ups, supply chains, and jobs internally, sparking a debate on protectionism versus globalization.
Understanding Globalization
Globalization seeks a borderless world or aims to perceive the world as a global village. What today is known as globalization began with the end of the Cold War and the disintegration of the Soviet Union in 1991. This global integration resulted from two victorious systems at the end of the Cold War – democracy and capitalism. The dimensions of globalization are characterized by an accelerated flow of goods, people, capital, information, and energy across borders, facilitated by technological advancements.
Pros and Cons of Globalization
Globalization offers access to goods and services, resulting in increased trade and improved living standards. It intensifies competition within domestic product, capital, and labour markets as well as among countries adopting different trade and investment strategies. However, globalization has been criticized for widening global disparities, facilitating the spread of international terrorism and organized crime, and allowing for the rapid spread of diseases. It has also led to cultural homogenization, fostering a danger of loss of precious cultural practices and languages.
Protectionism: Meaning and Implications
Protectionism refers to government policies that restrict international trade with the aim of supporting domestic industries. Tariffs, import quotas, product standards, and subsidies are some of the tools used to enact protectionist policies. Globalization had already started to plateau since the 2008-09 global financial crisis, as demonstrated by Brexit and the US’ ‘America First’ Policy. The spread of the Covid-19 pandemic may further fuel anti-globalization or protectionism sentiment.
Protectionism in India
Over the past few years, many countries have criticized India for adopting protectionist approaches. This is evident in instances such as India’s refusal to agree on terms for a mini trade deal with the US and walking out of the 15-nation Regional Comprehensive Economic Partnership. The “Aatmanirbhar Bharat (Self-Reliance) initiative” launched in May 2020 was also viewed internationally as a protectionist move.
The Way Forward: De-Bureaucratization and People-Centric Policies
To improve its competitiveness, India needs policies that de-bureaucratize sectors such as agriculture and simplify labour laws. A holistic and easily accessible ecosystem must be established from the procurement of raw materials to the sale of finished products. To trigger employment, value addition in local areas needs to be accelerated through people-centric and sector-specific policies.
Fostering Alternative Global Alliances
India now needs to look beyond regional alliances and consider a cooperative alliance with like-minded countries in terms of trade, such as the USA, EU, and Japan. This would serve as an alternative to counter the dominance of China in the global supply chain.
Promoting Research & Development and Capacity Building
To become cost-competitive and quality competitive, there is a pressing need to prioritize capacity building and develop a policy framework. Enhancing domestic production, increasing exports and promoting research are key to becoming more independent. It is crucial for India to plan for future decades, ensuring sustainable growth and development.