Navigating the Great Global Reset

India has a relatively narrow three-decade window to get rich before it gets old. It must surmount significant challenges to march ahead

- NEELKANTH MISHRA

OVER THE PAST four centuries, there has been a major reset in global power relations every 75 to 100 years. Now, 80 years after World War II, another major reset is due, given the shift in the world's economic centre of gravity.

The signs are clear: post-WWII institutions like the UN and the World Trade Organization are diminishing. Different forums are now used for seeking common ground, like the G20, BRICS+, APEC, etc. Bilateral trade pacts are emerging, as are new multi-lateral arrangements. If two hot wars, reigniting old territorial disputes (like between Venezuela and Guyana), were not signals enough, there are now drone attacks on ships within 200 nautical miles of the Indian coast, a US-led front is now actively bombing Houthi territories in Yemen, and the number of parties involved in the conflict continues to rise.

This ongoing global reset in power balances poses several challenges for India on four major external dependencies: demand, capital, technology, and energy. Healthy external demand means stronger exports of goods and services. Capital inflows help firms and the economy scale faster. Technology transfers, either through inbound foreign direct investment (FDI) or trade, accelerate productivity improvement. Lastly, GDP growth is difficult without higher consumption of energy. Rising geopolitical uncertainty imperils all of these.

First, external demand. Having pulled forward growth through fiscal and monetary measures, the US and Europe may slowdown. China is hitting the limits of its growth model, Japan has stagnated, and Latin American GDP (in USD terms) is still where it was nearly a decade back. The policy coordination seen after 2008 is very unlikely now; trade wars and growing distrust are additional headwinds.