India’s Grand Strategy: Economic Reforms, Global South Diplomacy, and Regional Integration

The economic policies pursued by India after independence were primarily based on a centrally planned model inspired by the Soviet Union and focused on state intervention and control through the five-year plans. They led to the creation of public sector enterprises in industries critical to steel, coal, and telecom; these created jobs, and built infrastructure, but were also manifested in inefficiencies and bureaucratic delays. The Import Substitution Industrialization (ISI) strategy focused on reducing dependence on foreign imports and encouraging domestic production. The “License Raj,” characterized by the complicated environment thwarting innovation and economic progress, had created obstacles to thriving businesses owing to several permits that needed to be acquired before commencing operations. The public sector dominance faced issues such as inefficiency, corruption, and political interference, which were detrimental to overall economic progress.

Post-independence India had also turned towards multilateralism as a strategic necessity to amplify its influence in a bipolar world dominated by both the United States and the Soviet Union. It was essential due to its lack of material resources and military power. Under Nehru’s leadership, India accepted this multilateralism as an extension to its non-alignment policy and utilised it through the United Nations towards decolonization, peaceful settlement of disputes, and cooperation among nations. However, early disillusionment with the UN, such as that concerning Kashmir, made India wary of multilateral interventions in South Asia.

India experienced a complete paradigm shift in its policy approach in the post-Cold War decade of 1990s . Economic reforms aligned India with the international economy and, hence, it was necessary to engage with trade forums such as the World Trade Organization. At the same time, the breakup of the Soviet Union ended India’s dependence on this Cold War partner and compelled it to adjust to a world under a single power as it went into multilateral institutions and built strategic bilateral relationships, like the US-India nuclear deal, with others. It started asserting itself as an up-and-coming power, as seen in its push for a permanent seat on the UN Security Council through the G4 coalition and a champion in issue-based groupings such as BASIC (on climate change) and IBSA (South-South cooperation).

Domestically, political stability and economic growth provided the foundation for sustained multilateral engagements, and India’s democratic framework and developmental priorities have shaped its cautious yet ambitious global strategy. Issue-specific concerns, like advocating the principle of “common but differentiated responsibilities” in climate negotiations and opposing developed nations’ protectionist policies in trade discussions, have underscored India’s pragmatic realignment from moralistic universalism to interest-driven coalitions. Overall, India’s multilateralism reflects the careful balancing of its historic ideals with its contemporary aspirations as a rising global player. [1]

India and regional associations:

India plays an important role in regional organisations, including ASEAN, SAARC, and BIMSTEC. Such regional bodies aim at bringing economic cooperation, cultural exchange, and political stability into the respective regions. Through these forums, India has clearly articulated its commitment to regional integration, seeking to emerge as a regional leader.

1. ASEAN: A sturdy strategic partnership between India and ASEAN has been established on shared strategic security goals along with economic development and mutual cultural ties. Areas of cooperation include trade and investment, connectivity, defence and security, science and technology, and people-to-people exchanges. Through its “Act East Policy”, India has further placed its engagement with ASEAN onto an even higher platform and has enhanced economic and strategic linkages. There will be an engagement in regional issues such as maritime security, counter-terrorism and developmental sustainability in the region. ASEAN-Indians’ engagements will also be instrumental in understanding the contours of this complex Indo-Pacific region. [2]
2. SAARC: This association was conceived in the year 1985 through a collective process aimed at achieving social upliftment and cultural growth throughout the regions of South Asia. Due to its conducive location, sheer economic clout, as well as political influence, India is well-placed to set the agenda for the organization. Geopolitical challenges, most of all, the India-Pakistan rivalry, however, have so far barred SAARC from its fullest realization. In spite of such challenges, India has relentlessly been working for regional cooperation and has made a great deal of SAARC projects relating to connectivity, trade, and poverty reduction. [3]
3. BIMSTEC: Seven nations in this subcontinent of South Asia and Southeast Asia comprise it, seeking regional integration to enhance cooperation in economics. India has been very active and vibrant in BIMSTEC by promoting connectivity, trade, and investment within the BIMSTEC region. India has also introduced several projects for the improvement of transport and energy infrastructure, including the Kaladan Multi-Modal Transit Transport Project and the Trilateral Highway. Also, India has extended support for capacity building and technical assistance in other sectors of agriculture, health, and education. India’s engagement with BIMSTEC is in pursuance of its “Act East Policy,” which seeks to further strengthen ties with nations in the Indo-Pacific region. [4]

You May Like: The Palk Bay Conflict: Sustainable Solutions to India-Sri Lanka Fishermen Dispute

Redefining its geoeconomic strategies-

Participation in initiatives such as IMEC and I2U2 would signify a preliminary shift beyond the axis of traditional South-South cooperation in India’s foreign policy. These relationships have been defined in terms of their flexibility and multi-pronged objectives focusing on economic growth, technology innovativeness and strategic alignment in cooperation. [5]

1. IMEC intends to provide a route for trade and is beginning to spread into an overall framework for cooperation in energy, technology and infrastructure development. The idea is of an integrated and redundant supply chain that mitigates geopolitical challenges.
2. I2U2, apart from an economic perspective, has quickly found other vectors of cooperation, such as counter-terrorism, cyberspace, and outer space. Evolving these partnerships is taking India forward in its engagement with the world and its ambition to become a leader in regional and global dynamics.

India has been quite busy redefining its foreign policy and economic discourse. This is very much about the promotion of local currency trade settlements. India has started the process of moving away from using the dollar to earn peer-to-peer economic relations with partner nations. Indian Rupees trading opened with other countries, such as Russia and Malaysia, for trade settlements. Therefore, advantages include reduced transaction costs, hedging against fluctuations in exchange rates, and nurturing bilateral ties. However, challenges persist, including the further expansion of the network to include other countries and consideration of the potential risks associated with currency volatility. [6]

This redefined regional trade strategy for India revolves around strengthening South-South coalitions in certain important sectors. The digital economy is quite promising; India’s IT strength significantly aligns with several of the emerging digital needs around the developing world. Possible areas of collaboration include those in e-governance, digital infrastructure development, and skills building, which will stimulate mutual growth. Cooperation can also be found in pharmaceuticals. The capacity of Indian generic drug manufacturers can avail significantly affordable medicines in the partner countries, thereby greatly improving health care. [7]

Regional integration will be another way to innovate supply chains to create efficiency and competitiveness. Optimising those complementary values, and a free movement of goods between countries of the Global South can make supply chains resilient to global disruption vulnerabilities.

Finally, maximizing preferential trade access, easing customs procedures, lessening barriers, as well as creating regional value chains, will open up more trade flows in support of economic integration and convince sustainable development throughout the Global South. [8]

Challenges-

Indian ambitions to intensify the South-South partnerships face several hurdles. To start with, inadequate infrastructure across many developing areas proves a major hindrance. Deficient transport networks, limited access to energy, and a scanty supply of digital connections could impede efficient trade and economic integration. Bridging these gaps would mean enormous investment in infrastructural development.

Further, the increasingly convoluted geopolitical environment poses another challenge. China’s growing economic and political advantage across a multitude of developing countries is a considerable threat. As such, India must tread the competitive waters carefully while providing attractive and sustainable alternatives to the Chinese initiatives.

Last but not least, there exists complicated regulatory frameworks across the Global South, thus forming hindrances to trade and investment. Harmonizing regulations and streamlining processes through customs are important for enabling trade flows and pursuing regional economic integration. It would take concerted efforts on consensus building and developing frameworks of cooperation that are mutually beneficial to address those hurdles. [9]

Also Read: Bangabandhu’s Legacy Under Threat: The Campaign To Undermine Sheikh Mujibur Rahman In Bangladesh

Bilateral agreements as a strategic alternative to multilateral deals-

Bilateral trade agreements are likely to be some of the most preferred components of India’s South-South engagement strategy: because they are fast and can easily address specific concerns. Such flexibility is important to meet diverse needs and varying levels of development in the Global South. By encouraging bilateral agreements in sectors where India has a better comparative advantage like pharmaceuticals, information technology, and renewable energy, India could strategically anchor its bilateral agreements. A focused approach is likely to push economic cooperation further, where the latter would be reciprocally beneficial. Successful bilateral agreements can even lay down the groundwork for bolder regional integration actions to further strengthen the overall foundations of South-South cooperation.

These bilateral pacts are concerned with development strategies that not only advance but integrate them into broader multilateral efforts, which hopefully will complement the whole vision of South-South cooperation. Thus, the well-rounded approach that accepts avenues both for bilaterality and multilateralism will determine the enhancement of this regional trade benefit for sustainable economic growth in the Global South. [10]

Way Forward-

India would require a multi-pronged approach to rethink its regional trade policy. Infrastructures, particularly connection, energy, and digital infrastructure, need to get increased attention to create formidable networks for smooth trade flows and economic integration. An advanced strategy will have to keep a balance between cooperative and strategic autonomy to meet the challenges of geopolitical rivalry. India also has to build credible alliances on the foundation of respect and common interests, while attracting other major players with long-lasting, attractive alternatives. Lowering trade barriers and improving the competitiveness of South-South trade will also involve strengthening regional value chains, harmonizing standards, and streamlining regulatory frameworks.[11] Creating opportunities for people to interact, share knowledge, and build capacity through cultural and educational initiatives will strengthen ties and lay a foundational groundwork for continued collaboration.

---

References:

1. High Ground to High Table: The Evolution of Indian Multilateralism by Rohan Mukherjee and David M. Malone
2. [2] https://www.indmissionasean.gov.in/pages/MjU
3. [3] Bhargava, M. (2010). SAARC: A Regional Cooperation Initiative. International Journal of Politics and Governance, 1(1), 1-10.
4. [4] Saxena, S. P., & Bhadauriya, S. (2022). India and BIMSTEC: An Analysis of India’s Trade Performance and Prospects. SRCC Journal of Research, 33(1), 103-114.
5. [5] https://www.orfonline.org/research/india-middle-east-europe-economic-corridor-towards-a-new-discourse-in-global-connectivity
6. [6] https://www.mea.gov.in/loksabha.htm?dtl/36851/QUESTION+NO271+TRADING+IN+LOCAL+CURRENCIE S#:~:text=(a%20to%20e)%20The%20Reserve,of%20global%20trade%20with%20emphasis&text=Trade%20se ttlement%20with%20Malaysia%20in,opening%20Special%20Rupee%20Vostro%20Account 7https://www.weforum.org/stories/2024/09/india-role-in-the-intelligent-age/
7. [7] https://www.weforum.org/stories/2024/09/india-role-in-the-intelligent-age/
8. [8] “India’s Act East Policy: Challenges and Opportunities” by the Institute for Defence Studies and Analyses
9. [9] Chaturvedi, S., & Mendiratta, S. (Eds.). (2023). Reimagining India’s Role in the Global South: A Focus on South-South Cooperation. Observer Research Foundation.
10. [10] Institute for Defence Studies and Analyses. (2022). India’s Act East Policy: Challenges and Opportunities.
11. [11] https://www.india-briefing.com/news/

Disclaimer: The views expressed in this article are of the author solely. TheRise.co.in neither endorses nor is responsible for them. Reproducing this content without permission is prohibited.