Economic Statecraft in the Emerging Global Order: India’s Geoeconomic Strategy Explained

Context

Globalisation is increasingly being shaped by strategic competition, where supply chains, technology ecosystems, critical minerals and trade networks are becoming instruments of geopolitical power.

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Emergence of a Geoeconomic World Order

• Fusion of Economics and Security: Economic tools such as tariffs, export controls, sanctions and technology restrictions are now central instruments of statecraft.
  • g.: U.S.-China trade war, semiconductor restrictions, rare-earth export controls
• Shift from Efficiency to Resilience: Countries are prioritising secure and diversified supply chains over purely low-cost globalisation. (g: friend-shoring, near-shoring, supply-chain resilience initiatives)
• Decline of Traditional Multilateralism: WTO-led universal trade frameworks are weakening as countries increasingly rely on bilateral and mini-lateral economic arrangements.
  • g.: IPEF, Indo-Pacific partnerships, regional economic coalitions
• Strategic Importance of Technology & Minerals: Semiconductors, AI, batteries and critical minerals are emerging as decisive sources of geopolitical influence. (g.: CHIPS Act, lithium diplomacy)
• Rise of Economic Nationalism: Major powers are increasingly using industrial policy, subsidies and domestic manufacturing promotion to secure strategic autonomy.
  • g. U.S. Inflation Reduction Act, EU strategic autonomy policies)

Why India is Gaining Strategic Importance

• Alternative Manufacturing Hub: Global firms seeking diversification beyond China view India as a large and relatively stable production base. (E.g.: Apple supply-chain expansion, electronics manufacturing growth)
• Demographic & Market Advantage: India combines a large workforce with one of the world’s fastest-growing consumer markets.
• Digital Governance Model: India’s Digital Public Infrastructure (DPI) model is emerging as a globally recognised governance framework. (E.g. UPI, Aadhaar, DigiLocker)
• Technology & Innovation Ecosystem: India is becoming a key hub for AI, Global Capability Center (GCC), semiconductor design and engineering services.
  • g. India hosts 2,117 GCCs and over 250 AI/ML Centres of Excellence)
• Democratic Strategic Partner: India is increasingly viewed as a trusted democratic alternative in an uncertain geopolitical environment.

India’s Geoeconomic Strategy

• Multi-Alignment Diplomacy: India is diversifying economic partnerships without exclusive bloc alignment. (Engagement with U.S., EU, Gulf, ASEAN, Russia and Global South simultaneously)
• Supply-Chain Resilience Policies: Focus on domestic manufacturing and reducing vulnerabilities in critical sectors. (Examples: PLI schemes, semiconductor mission, logistics reforms)
• Technology Partnerships: India is deepening strategic cooperation in semiconductors, AI, telecom and clean technologies. (g.: India-U.S. semiconductor initiative, Quad critical technologies)
• Critical Mineral Outreach: Building overseas resource partnerships to secure lithium, cobalt and rare-earth supply chains. (g.: Agreements with Australia and Argentina)
• Economic Diplomacy as Foreign Policy Tool: Trade agreements and connectivity projects are increasingly integrated into strategic policy. (g.: IMEC corridor, FTAs with UAE and Australia)

Structural Challenges Before India

• Import Dependence: India remains dependent on external sources for semiconductors, critical minerals and advanced technologies.
• Infrastructure & Logistics Bottlenecks: High logistics costs and uneven industrial infrastructure affect competitiveness. (Logistics costs around 13–14% of GDP)
• Weak R&D Ecosystem: Low investment in research and innovation constrains technological leadership. (R&D expenditure around 0.7% of GDP)
• Limited High-End Manufacturing: India’s integration into advanced global value chains remains below East Asian economies.
• Balancing Geopolitical Pressures: Simultaneous engagement with competing powers creates diplomatic and economic constraints.

Way Forward

• Build Competitive Manufacturing Ecosystems: Improve logistics, industrial clusters, ease of doing business and energy reliability.
• Strengthen Innovation Capacity: Expand investment in R&D, semiconductors, AI and emerging technologies.
• Deepen Strategic Trade Partnerships: Pursue diversified FTAs and resilient supply-chain coalitions.
• Develop Skilled Human Capital: Align higher education and skilling with advanced manufacturing and technology sectors.
• Preserve Strategic Autonomy: Maintain diversified economic engagement while avoiding overdependence on any single power bloc.

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