Guru of globalisation

The Presidency of G20 should be used by India to argue for globalisation and a rules-based global economic order

A major problem that is now roiling the global economy is the rising levels of protectionism and industrial policy. India has been a great beneficiary of globalisation, but has (so far) taken a back seat, with the leadership role on these issues provided by advanced economies. When advanced economies are not working for globalisation like they used to, there is an important possibility for India to play a leadership role, through all levers of state power, including the G20.
 

While the Indian state has often dragged its feet on international integration, a careful examination of the progress in the post-1991 period shows the immense importance of globalisation. The Indian economy is now undergirded by gigantic resource flows, of the order of nearly $1 trillion each on the capital and current accounts per year.
 

Consider the IT industry. IT is now the biggest industry in India. It was made possible by foreign technology, foreign companies building captive operations in India, Indian companies receiving foreign equity capital, and of course Indian companies getting foreign customers. Every part of the journey of India’s most important industry was made through intense engagement with the world. Indeed, the journey to success in IT for India was all about removing barriers to engagement with the world.
 

These facts show India’s interest in globalisation. Indian interests are fostered by a more open world order, in which global companies are freer to make foreign direct investments (FDI) into India, where foreign capital more readily flows into India, and where foreign customers are comfortable giving critical technology tasks to Indian companies. As an example, the upsurge of “data nationalism” all over the world, where governments try to block off foreigners from operating in the local IT sector, is both a zero-sum game and against India’s interests.
 

Many features of the world economy are now running in the opposite direction. The US has passed the Creating Helpful Incentives to Produce Semiconductors and Science (CHIPS) Act and the Inflation Reduction Act (IRA), which will provide hundreds of billions of dollars to domestic semiconductor, energy and battery industries. The Economist quotes the UN, which finds that more than 100 countries, accounting for over 90 per cent of the world’s gross domestic product (GDP), have initiated “industrial policy” measures, and also investment screening and export controls as strategic measures aimed at political rivals.
 

India has also done similar things. The production-linked incentive (PLI) scheme was launched by the Government of India in 2020 to help make India a manufacturing and export hub. Eligible participants receive incentives (4-6 per cent of production value) for five years, conditional on annual investment and production value targets. This is a costly path for India, given the extreme shortage of fiscal resources for the core state functions of building public goods like security, judiciary as also redistributive programmes aiming at the most vulnerable.
 

Technology policy in India has drifted into data nationalism, and initiatives, such as Unified Payments Interface, were built by blocking foreign companies from competing in Indian payments. It is in India’s interest if a country like, say, Brazil will have a free and open world where Indian IT firms are first class participants, as opposed to policy frameworks in Brazil that favour data nationalism, which engage in “data is crude oil” analogies.

Illustration: Binay Sinha

 

This calls for strategic thinking on the questions of globalisation and industrial policy. For decades, India gained from globalisation even though the Indian government engaged in solidarity with the third world, and tried to impede the process of globalisation. The revolution in the Indian economy from 1991 onwards could not have been possible without the world of globalisation that was largely built by the West. The single big number that should play on our mind is the total proceeds from goods and services exports in India, which now stands at a full trillion dollars per year.
 

Globalisation has served India well. The political environment in the world around globalisation has changed. The advanced economies are less inclined than before, to expend political capital in favour of globalisation. And, India’s clout has gone up. Now it is time for the Indian state to understand the best interests of the people of India, and pick up this mantle. Critics could argue that the West is engaging in industrial policy and protectionism as a consequence of China and Russia breaking international rules. The shape of this “third globalisation” could perhaps be full globalisation between democracies and caution when dealing with undemocratic countries. Global security considerations would need to be accommodated in this new form of globalisation.
 

The G20 was founded in 1999 after the Asian financial crisis as a forum for the finance ministers and central bank governors to discuss global economic and financial issues. It was upgraded to the level of heads of state/government in the wake of the global financial crisis of 2008. These 20 countries add up to two-thirds of the world population, three-fourths of global trade, and almost 85 per cent of global GDP. The G20 has soft power in shaping global thinking on the optimal behaviour of governments and groupings of governments. During the Indian G20 presidency, the Indian government has an enhanced role in shaping the agenda and outcomes of G20.
 

Our prime minister is an important voice in the world today. He has publicly stated often that serious reforms and change happen not because of government actions alone but when these ideas become people movements, “jan-aandholans” in his words. In line with this thinking, the government has constituted 11 G20 engagement groups in important sectors with state government, private sector, academia and civil society representatives. So the machinery required to convert these ideas into mass movements is in place.
 

This is the time for India the Vishwa Guru to show the world the path. Guru in its original Sanskrit phrase means more than just a teacher. It means an exemplar in life, an inspirational source. It is time for the Guru to remind the world of the way forward, and walk the talk.

The writer is an honorary professor at Centre for Policy Research, member of a few for-profit and not-for-profit boards, and a former civil servant