What Economic Interdependence in Retreat Means for Asia and India

FOR DECADES, globalisation drove Asia's meteoric rise, transforming it into the manufacturing engine of the world.

- By Amit Kapoor & Meenakshi Ajith

The proliferation of supply chains, the entry of China into WTO in 2001 and the search for efficiency created an ecosystem of economic interdependence that underpinned both prosperity and stability across the region. In the 1980's the share in world GDP based on purchasing power parity for emerging markets and developing economies (EMDEs) particularly in the East stood at only 37 per cent whereas advanced economies had a 63 per cent share. Somewhere around 2007-08, the two blocks had equal share in the world GDP. After this point, the EMDEs bloc surpassed advanced economies, reaching a level of about 58 per cent in 2023. This high was driven by the rise of eastern economies and is under strain today due to a confluence of geopolitical tensions, protectionist policies, and national security concerns. Even though the USA and China are in the headlines of this spat; it has set in motion a gradual yet profound shift away from tightly integrated global markets. The defining rupture indeed came under the Trump presidency, by upending decades of trade orthodoxy. The US-China trade war, initiated with tariffs on over $350 billion worth of Chinese goods, did more than just disrupt bilateral commerce. It exposed the fragility of global supply chains and underscored the political risks embedded in economic interdependence.