Quo Vadis, Global Order?

Can we choose to ignore planetary boundaries and single-mindedly pursue economic growth, hoping to retrofit later to ensure ecological security? This has been the standard operating procedure historically, adopted by all the advanced economies. The question is whether India can follow the same SOP.

The Growth Model

Can we continue with our existing model of growth being generated in select nodes across the country and attracting migratory labour from regions that have been left behind over the past few decades, further debilitating their growth prospects? Can we hope to draw upon our demographic dividend if our labour participation rates remain as low as at present, especially in female labour force participation? Is a 10X differential between per-capita incomes across our major states (Bihar and Goa) tenable and sustainable? 

These and several other critical questions must involve the largest numbers because all of us will be directly and substantially affected as events unfold over the next two-and-a-half decades. This column is an attempt to trigger some thinking on where we are headed, and how we will get to our aspirational goals. 

But it is surely important to look at the Indian prospects in the larger international context. Therefore, we begin with quo vadis, the global order? Fukuyama’s end of history thesis has surely been upstaged. A new history of the world is being inscribed as we write this. How the future will judge our present will only be clear when we know who emerges as the victor from the current turbulence that marks the world today. Will the existing hegemon fade away and be replaced? Or will it form a convenient duopoly with our northern neighbour or even a hegemonic Troika with Russia also joining in with its conqueror’s sight set on a Europe, which the US National Security Strategy document describes as "weak, divided and complacent"? Will India be frozen out of these possible arrangements? How should our foreign policy and, perhaps more importantly, our handling of economic growth be designed going forward to prevent such an ominous outcome, which stares us in the face?

The Geopolitical Stage 

The announcement of the latest US National Security Strategy; the ongoing war in Ukraine and the unfolding crisis of leadership and purpose in Europe; the humanitarian crisis in Gaza and the West Bank with the emergence of imperial Israel; the inexorable rise of China as a major economic power with a surprisingly high degree of technological heft; and the socio-political convulsions in our neighborhood: all of these unambiguously point towards India facing a very uncertain and unpredictable geopolitical global setting. Its foreign policy must be redesigned to respond to these emerging challenges. 

MAGA seems ever more to be a prescription for the US to withdraw into its insular shell, leaving the developing world to take care of itself with its own meagre resources. A coalition of the willing is much needed today to try and fill the gaping void left by the ongoing US withdrawal from the global arena. Will India be a member of such a coalition, and will it partner with China in forming such a coalition of emerging economies that will be able to exert the needed influence on shaping global public good and the rejuvenation of a rule-based world trading order?

These are important questions for which the past is not a guide for future actions. 

We therefore need an intellectual churning on the global stage, but most certainly in India, to chart our way forward in these choppy waters. Business as usual simply won't do.

In Everything All At Once: India And The Six Simultaneous Global Transition, a recently published book that I co-authored with Ishan Joshi, it is noted that India faces a historically unprecedented challenge of negotiating six simultaneous global transitions. 

The Six Challenges

The six transitions that characterise the current international situation are geopolitical, geoeconomic, the rise of the Global South, the rise of Asia, climate change, and the fifth technological revolution led by artificial intelligence (AI). Each one of these transitions necessitates a major policy rethink not only at all levels of government but also among the other stakeholders, such as the private sector, civil society, and academia. It is, then, crucial for all these stakeholders to come together on a platform of mutual trust and accountability to ensure that we build a solid societal nation-wide convergence on the path towards India@100.  

Given the flux in the international arena, it may not be the time to allocate our limited resources to trying to reach the high table of global governance. Instead, we could be quite observers of the "MAGA versus the rest drama" that unfolds. The best foreign policy at this stage would be to focus laser-like on how to grow our economy at a faster rate than we have done even over the past 35 years, when the first round of structural reforms was undertaken. 

Over these three-and-a-half decades, the Indian economy has grown at an average annual rate of about 6.5%. This is, of course, creditable, especially when we were also spending a great deal of our societal energy and political will on making sure that our democracy is strengthened and our social stratification is attenuated. This accomplishment of undertaking simultaneously the economic, political, and social transitions can hardly be overemphasised. It has been unique in world history. 

But economic growth matters. In contrast to us, China achieved a 10% average rate of growth for three decades between 1990 and 2020. In 1990, both China and India had a per-capita income of about $320. Today, a Chinese person, on an average, enjoys an annual income that is 5X that of an average Indian in nominal terms, and about 3X in PPP terms. But in terms of comprehensive national power, which is based on the country’s total GDP, China has become five times stronger!

Bridging The Gap

We need to close this gap. And to do that, we need to ensure that our economy grows at no less than 8%, and preferably in double digits, for the next 25 years. This is achievable. We did clock an average of 8.3% annual GDP growth rate for eight years, between 2003 and 2011. The second quarter (July to September 2025) GDP growth of 8.2% is perhaps the beginning of a "goldilocks" phase for the Indian economy. This optimism arises because this high growth comes with exceptionally low inflation and muted inflationary expectations, an uptick, albeit slight, in private capex, continued quietude in labour markets, and prospects of yet another robust agriculture sector performance. We should seize this opportunity, sustain this growth impulse, and build the momentum for higher growth without being distracted by the Trump-induced hiccups in world markets.  

The government has already initiated some of the right measures to lift the growth rate: GST rationalisation, the implementation of the four labour codes, the revoking of several quality control orders that were strangling exports, and a continued push in public capex, among others.  

Stable Policy Regime

The critical step that needs to be taken to supplement and reinforce the abovementioned measures and put the Indian economy on a higher (8%+) growth path is to instil greater confidence in government policies among private investors.

The private investors need a stable policy regime with predictable outcomes for all categories of investors. A visible and tangible improvement at the ground level in the ease of doing business is still visibly needed for transferring the growth impulse from the larger organised corporates to the small and medium enterprises that populate the very large unorganised sector in the Indian economy. 

Given the highly diverse nature of these small and medium enterprises operating in the local economy, a pan-India policy solution alone would not suffice. We need a hyper-local approach for addressing the constraints that shackle these enterprises, which embody the real growth impulse, and are not as risk-averse as the larger enterprises. This calls for a radical change in the design and construction of our industrial policies at both the Central and State government levels. We will discuss this in our subsequent columns. 

(The writer is an eminent economist and Chairman, Pahle India Foundation. He has served as Vice-Chairman, NITI Aayog. Views are personal.)