FES Office for Regional Cooperation in Asia, in collaboration with FES India Office, hosted a two-day national lab in New Delhi. A diverse group of thought leaders and experts were invited to discuss and exchange their views. Facilitated by the Executive Education team of the Lee Kuan Yew School of Public Policy, they identified key geopolitical and geoeconomic megatrends impacting India to develop possible scenarios in the future. The group then proposed strategic options that could achieve optimal results and navigate India through these geopolitical and geoeconomic challenges.
Here the group considers a scenario where the Taiwan strait Conflict has escalated to a full-scale clash. India feels the heat as the conflict happens close to home. The Indian Ocean becomes more militarized with frequent military exercises. Trade with East Asia is completely blockaded. This leads to changes in global supply chains towards diversification, near-shoring, friend-shoring and re-shoring. Domestically, India will suffer a huge drop in GDP, high inflation, and consumer price increase due to said supply chain disruptions. On another hand, India can become the “third pole” in geopolitics as conflicts between the US and China continue. It can bid for a bigger role within the so-called BRICS alliance (Brazil, Russia, India, China, and South Africa), the Shanghai Cooperation Organisation, and other regional and trading blocs. This might help prevent China from using them to its advantage, and provide an opportunity for India to integrate itself faster into supply chains.
For this scenario, participants identified three strategic policy options to achieve positive outcomes and avoid undesirable features of the scenario:
In this scenario the group envisages a situation where the current economic slowdown in China and the reorientation of the United States towards prioritizing its domestic economy push both sides to reach some kind of agreement regarding the trade and technology war, to reduce damage to their local economies. US and China also reach a new agreement on Taiwan where there will be no unilateral change to the current status quo for the near future. The world order undergoes a gradual repair, with international institutions and global norms strengthened. With the geoeconomic trends also improving, supply chains have fewer disruptions as the trends of friend-shoring and de-risking slow down. This also provides an opportunity for India to focus on domestic reforms including economic or labour laws to prepare for future threats. However, the easing of US-China relations might prompt Beijing to look into the Line of Actual Control that demarcates the territories controlled by China and India, respectively, which could lead to tensions between the two.
Based on the above scenario, participants came up with three policy recommendations that could help boost positive features of the scenario:
In this scenario, the group imagines that geopolitical tensions are managed, but there is fragmentation of trade infrastructure and soaring of energy prices on a global level. India is, however, firewalled from major economic shocks, maintaining macro-economic stability driven by its large consumer domestic market. Tension with China intensifies over rare-earth minerals, leading to high computer-chip prices. This in turn prompts India to sign free-trade agreements with the European Union, the US, and the United Kingdom. On the military front, India is expected to tilt towards the US as it has become one of the latter’s reliable Indo-Pacific partners. But India continues to largely seek a balance in terms of great power politics as it wants to ensure that geopolitical competition is managed.
Participants identified three strategic options to maximize positive features of the scenario and avoid undesirable outcomes:
In this scenario India’s ability to exercise strategic autonomy and manoeuvrability comes under great pressure as all countries look to their own interests and peace disintegrates. The team identified different variables that affect India, such as defence technology, commerce, financial institutions, and foreign policy. In terms of international politics, the multilateral system is dysfunctional, giving way to authoritarianism. In terms of security, vulnerability and energy insecurity lead to large-scale economic deprivations with adverse implications for institutions and social stability. In terms of development and economics, the rupee depreciates, which impacts on the remittances. Divisions and instability in the neighbourhood also have a spill-over effect on the country.
Based on the above scenario, participants came up with three policy recommendations that India could take to avoid undesirable outcomes:
Summary compiled by Dinkim Sailo, Senior Programme Manager, FES Office for Regional Cooperation in Asia and Takdanai Ketkaew, Programme Assistant, FES Office for Regional Cooperation in Asia.
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