Covid-19 has plunged the world into a deep crisis. The global economy has run into a “dual” supply and demand shock. An estimated 25 million jobs are threatened, and 80 per cent of the 3.3 billion-strong global workforce is affected by Covid-related economic closures.
The full ramifications for the world will become clearer with time, but we have a sense of what’s coming: The
The world gross domestic product is expected to contract by 3 per cent, international trade may decline by up to 32 per cent, and 49 million people could slip into extreme poverty.
The road to achieving the Sustainable Development Goals
is now littered with challenges. Global governance underpinned by multilateralism is going to be instrumental in delivering the world out of this crisis and laying the foundations for recovery and growth. This will be possible through coordinated action backed by effective joined-up planning. India has an active role to perform in global fora.
The 2008 recession
led to the ascent of a more inclusive form of multilateral governance: The G20
gained in prominence and reforms in Bretton Woods’ institutions (IMF and World Bank) gathered steam. In a post-Covid world, India’s leadership will be key ahead of its G20
presidency in 2022. As the fifth largest economy in the world, home to 18 per cent of the world’s population, the world’s largest democracy, and one of the fastest growing digital and green economies globally, India should stake a strong claim to post-Covid global agenda and norm-setting.
Multiple factors at play support this prospect. First, India has always been a strong campaigner of multilateralism, has persistently signalled intent to uphold it, and make it more inclusive. It is one of the founding members of the General Agreement on Tariffs and Trade and has only recently joined the bandwagon of countries signing free-trade agreements (FTAs) after the collapse of the Doha round. It has punched above its weight on climate goals, remains on track to achieve its nationally determined contributions, and has a strong push on renewables. India is an active G20
member, and can lead the platform to achieve its full potential, where China-US tensions have tended to overshadow proceedings of late.
Second, India has much to offer by way of South-South cooperation in the neighbourhood as well as in Africa, building on the historical legacy of the non-aligned movement. It runs some of the world’s largest public works and social protection programmes, has demonstrated capacity in digital benefits and welfare transfer, and is a climate leader, with lessons for the global South. India is also already playing a significant role in overseas development assistance through both EXIM Bank’s lines of credit (totalling $25.15 billion as on December 2019), and through aid allocated in Budget ($1.32 bn in 2019-20).
Third, multilateralism is under significant threat owing to frequent lack of cooperation and consensus. The trend predates the pandemic. The World Trade Organization’s (WTO) prominence was on a declining path, as the Doha negotiations reached more deadlocks than agreements, and countries aggressively entered into bilateral and regional FTAs. The US and China
were locked in an escalating tariff war, with little regard for the WTO’s dispute resolution mechanism. The US had also announced its exit from the Paris Climate agreement dealing a blow to the critical fight against global warming.
Fourth, the worrisome prospect of a China-led global world order now looks rather slim, with what many deem as an irresponsible and opaque handling of the Covid-19 outbreak. The infiltration of Chinese low-quality personal protective equipment and faulty testing kits, has not helped its optics. On trade, China’s market-distorting industrial subsidies and pricing policy were already thorny issues in the free trade discourse. But, while China
has not been able to demonstrate multilateral fair play, its economic performance has been nothing short of a miracle. It has lifted hundreds of millions out of poverty, raised domestic consumption, and stands tall in complex global supply chains. Time and again the collapse of China
has posed risks to the global economy. The future may look different, with ongoing plans to reduce dependence on China in several industrial supply chains. Labour-intensive manufacturing was already on the way out of China.
Fifth, and importantly, the agenda centred on the global public goals has seen a steady retreat of leadership, particularly by the US. It is clear the path to adversarial economic policies is unsustainable. Economic prosperity, inclusive growth, climate resilience, and safeguarding the global commons are all going to be achieved through cooperation, not insularity. This means countries will have to continue working together, and use multilateral decision-making to resolve disputes.
Unlike China, which became a global giant through brute commercial force, India can offer influence towards a rule-based system enshrined in values of consensus-building, democracy, equality, and shared prosperity. India will have a natural stake in shaping the discourse on critical emerging global issues, such as cyber space, technology, and the digital economy. It has a large e-commerce market and a lively tech and digital ecosystem.
India’s transformation to a responsible emerging power-centre lends it with credentials to lead the revival of multilateralism and globalisation from the clutches of widespread protectionism.
Bhunia works in international development with IPE Global and Nataraj is a senior economist, professor at IIPA, and ex-Bruegel Fellow