Globalisation, old and new: What changing world order means for India | Business Standard Column

Clipped from: https://www.business-standard.com/article/opinion/globalisation-old-and-new-what-changing-world-order-means-for-india-121062501074_1.html

Globalisation is morphing as new agendas come into focus. These now drive action on climate change, taxation of global companies, tackling terrorism, sharing vaccines and the like, writes T N Ninan

Some of the traditional forms of globalisation (the free movement of goods, money, people, etc) are in partial retreat, but globalisation is morphing as new agendas come into focus. These now drive action on controlling climate change, taxation of global companies, tackling terrorism, sharing vaccines and the like. Cross-border problems in a more integrated world are forcing countries to come together, even as elements of traditional globalisation lose traction. The old globalisation was essentially good for India. The new globalisation could be a mix of good and bad news.

Global trade, for instance, has begun growing slower than global GDP. This significantly reverses a long-term trend. In only one of the last seven years did the volume of merchandise trade grow faster than the world economy. In 2019, global trade shrank in absolute terms for the first time in a decade, and did so again in 2020 because of the pandemic. Protectionist walls have been going up in several countries, including India.

Consider then the freer movement of people. Europe and North America account for over half the total of world migrants, and their number has shrunk, though admittedly by a small margin. Brexit and Donald Trump’s policies have signalled the reversal of a 70-year trend of immigration regimes getting progressively more liberal. Some West Asian countries too have begun tightening visa policies.

India will be the loser if these new trends take hold. It is the world’s No. 1 source of migrants – which also makes it the No. 1 recipient of remittances. And freer world trade has benefitted India enormously in the last three decades. There is still a window of opportunity, in that many countries want to reduce their dependence on China, which is the world’s largest manufacturing and trading power. India could ride the tide, but other countries have wrested first-mover advantage.

It goes without saying that other elements of globalisation continue unabated, like the cross-border movement of capital – useful for India, since it is a net importer of capital. Then there is the impact of new technologies that led to Thomas Friedman’s “Flat World” thesis. An accountant in Bengaluru can work out tax calculations for someone in Boston, and a radiologist in Kolkata can analyse the results of a medical scan for a patient in London. India’s IT services revolution is not threatened.

What of Globalisation Phase-II? This exists just now as government agendas; how they impact business and countries will be known over time. Agenda-setting by governments is not great news for India because it is still essentially a rule-taker and not a rule-setter. Any benefit or cost to it therefore tends to be coincidental. A case in point is the new international corporate taxation regime that is being worked on. It stipulates a minimum rate of tax to be paid in the country where revenue is generated. India should be happy with this, but the primary beneficiaries of the new regime, when it comes into effect, will be the wealthy countries.

The situation with the climate change agenda is more typical. Though India is an enthusiastic implementer of the Paris Agreement of 2015, it will get no assistance (financial or technical) to switch to new technologies and give up old ones like coal-based energy. At the same time, the countries responsible for much of the historical emission of carbon gases get a free pass. Even on the international supply of vaccines, the numbers agreed on at the recent meeting of the rich club of G7 countries are unremarkable, while India’s push for a patent waiver on Covid vaccines awaits attention.

That leaves the most important element of the new globalisation, namely the growth of social media platforms. The giant tech companies that dominate the field have had a free run but have increasingly come up against sovereign state power, including in India. This should be a fit case for the setting of global rules for a global business. Given the rise of powerful autocratic states, it will be a difficult challenge. All the more important therefore that it be taken on.

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