External Affairs Minister (EAM) Dr. S. Jaishankar recently expressed concerns about the country’s approach to globalization and economic liberalization. Speaking at a recent event, Jaishankar highlighted how India, in its bid to integrate with the global economy, inadvertently provided unfair advantages to other nations. His comments have ignited discussions on the need for a reevaluation of the country’s economic policies, particularly in the context of increasing protectionism and shifting global dynamics.
Jaishankar’s remarks underscore a fundamental critique of India’s economic strategy over the past few decades—one that was largely shaped by the liberalization policies introduced in the early 1990s. While these policies helped India open up to global markets, they also exposed the country to significant vulnerabilities. The EAM’s statement calls for introspection on how India’s economic opening, in the name of global competitiveness, may have led to unintended disadvantages for domestic industries and workers.
India’s Economic Liberalization: A Double-Edged Sword
India’s economic liberalization, which began in earnest in 1991, marked a new chapter for the country. Faced with a balance-of-payments crisis, the Indian government, under the leadership of then-Prime Minister P.V. Narasimha Rao and Finance Minister Dr. Manmohan Singh, embarked on a series of reforms aimed at opening the economy to global markets. These reforms included reducing import tariffs, privatizing state-owned enterprises, and encouraging foreign investment.
The goal was to modernize India’s economy, foster competition, and attract global capital. The strategy, over time, succeeded in transforming India into one of the world’s fastest-growing economies, attracting foreign investments and facilitating access to global markets. Indian companies also found themselves better positioned to compete internationally.
However, the unintended consequence of these policies has been a disproportionate benefit to foreign companies, which were able to leverage India’s relatively cheaper labor and resources. While Indian businesses did gain access to global markets, they also had to contend with the challenge of competing against multinational corporations with far greater resources and established global networks.
Jaishankar’s critique points to the notion that India, in its eagerness to embrace the globalized economy, often overlooked the need to protect its domestic industries, especially those in sectors like manufacturing, agriculture, and traditional industries. Foreign firms, particularly in sectors such as retail, technology, and pharmaceuticals, gained substantial leverage, sometimes at the cost of India’s homegrown businesses.
A Call for Rebalancing the Economic Model
Jaishankar’s remarks come at a time when the global economic order is witnessing significant changes. Protectionism is on the rise, with countries reconsidering the risks of relying too heavily on foreign imports and multinational companies. In this context, Jaishankar’s words reflect India’s growing realization that it needs to take a more strategic approach to its economic policies.
India’s domestic industries, particularly in manufacturing, have been unable to match the scale and competitiveness of global players. This has contributed to a persistent trade deficit and a sense of economic vulnerability. While the Indian services sector, particularly IT, has flourished, other sectors have been left to struggle. The trade deficit, fueled by imports of goods like electronics, machinery, and oil, has exposed the country to global supply chain shocks and currency volatility.
Jaishankar, in his speech, emphasized the need for a recalibration of India’s economic strategy. He suggested that India should focus more on strengthening its own industries and creating a level playing field for domestic businesses. This may involve revisiting trade policies, offering incentives to domestic manufacturers, and promoting self-reliance—an idea that resonates with Prime Minister Narendra Modi’s “Atmanirbhar Bharat” initiative, which aims to make India self-sufficient in key sectors.
Jaishankar also pointed to the importance of fair trade practices, urging India to ensure that foreign investments and trade agreements are mutually beneficial and do not result in unfair advantages for external players at the expense of domestic interests.
Globalization and Geopolitics: A Changing Paradigm
Jaishankar’s remarks come at a time when the world’s economic and political dynamics are undergoing a profound shift. The COVID-19 pandemic, followed by geopolitical tensions and supply chain disruptions, has raised questions about the sustainability of open global markets. Countries like the United States and China have increasingly resorted to protectionist measures, citing national security concerns and economic vulnerabilities.
For India, this evolving global order presents both challenges and opportunities. On one hand, India must continue to engage with global markets to maintain its growth trajectory. On the other hand, it must ensure that its economic interests are safeguarded, particularly in strategic sectors such as technology, defense, and manufacturing.
Jaishankar’s comments can be seen as a call for India to embrace a more assertive and balanced approach to globalization. While opening the economy brought significant benefits, India must now take greater control over its economic destiny, ensuring that its industries are not left at a disadvantage in the face of foreign competition.
Charting a New Economic Course
EAM Jaishankar’s remarks highlight an important moment of self-reflection for India. As the global economic landscape shifts, India finds itself at a crossroads. The country’s openness to foreign markets and capital has undoubtedly fueled its economic rise, but as Jaishankar points out, this has also created vulnerabilities that need to be addressed.
In the coming years, India will need to recalibrate its economic policies, balancing the need for global engagement with the imperative of strengthening domestic industries. By doing so, it can secure its position as a leading global economy while ensuring that its growth is inclusive, self-reliant, and sustainable. Jaishankar’s comments serve as a timely reminder that, in the pursuit of global economic integration, it is crucial to ensure that domestic interests are never compromised.