Delivering the R N Kao Memorial lecture on 'The crisis of liberal democracy', Mehta said the political response to the triple crises of economy, institutions and information order facing the world has been to resort to populism and nationalism.
But, he said, this response is unlikely to solve the deep underlying problems.
"At this moment, India has the possibility of positioning itself as a leader of the free world... But it will have to remain true to its core liberal values, and not succumb to the dark temptations that grip the rest of the world," he said, adding that India will have to show "fresh thinking" to deal with the triple crisis.
The era of liberalisation since 1989 (in India 1991) is decisively coming to a close, Mehta said.
"That era was characterised by the belief that the state should be situated in the contest of global markets, now there is a demand to subordinate the market to the state," he said.
Though states will now reassert control over borders and the economy but they have no real solutions to these deep challenges and will continually engage in a politics of diversion, he added.