Economic Policy Is the New Foreign Policy Tool

Paper: GS – II, Subject: International Relations, Topic: Foreign Policy, Issue: India’s Economic Diplomacy.

Context:

In the contemporary geopolitical landscape, economic policy has emerged as a critical component of foreign policy. The recent India-US joint statement highlights the importance of “economic security,” signaling a shift towards economic statecraft as a central element of grand strategy.

Key Highlights:

The Rise of Economic Security:

• Definition and Importance:
• Economic security refers to the alignment of economic policies to enhance national security.
  • It encompasses supply chain resilience, innovation, and cooperation on investment reviews and export controls.
• Historical Context: Economic, industrial, and technological capabilities have always been integral to hard power.
  • The post-Cold War era saw a separation of economics and security, driven by globalization and relative political harmony among major powers.
• Recent Developments: The backlash against globalization and rising tensions among the US, China, and Russia have eroded the assumption of separation.
  • The Trump administration’s policies marked a significant shift, challenging deep economic ties with China and emphasizing domestic manufacturing.

The Impact of Global Events:

• COVID-19 Pandemic: The pandemic exposed vulnerabilities in global supply chains, prompting a reevaluation of economic dependencies.
• Ukraine Conflict: Russia’s invasion of Ukraine underscored the geopolitical ramifications of economic ties, particularly for countries like India caught between major powers.
• G7 Summit Insights: By 2023, the G7 leaders prioritized economic security over globalization, reflecting a broader shift in international priorities.

Russia’s Role:

• Despite its smaller GDP, Russia’s natural resources make it a significant player in the global economy.
• Trump’s outreach to Vladimir Putin reflects a desire to reshape economic partnerships, potentially reducing reliance on both China and the US.

India’s Strategic Position:

• India must navigate its relationships with both the US and Russia carefully, especially in light of its energy purchases from Moscow.
• A potential rapprochement between Trump and Putin could alter the dynamics of US-India relations regarding Russian oil.

Economic and foreign policy are increasingly interconnected globally. India must balance major power relations and pursue domestic reforms to adapt, as its strategic choices will shape its role in the evolving international order.

Source: (The Indian Express)

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