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Release peace: the magazine

Release peace: the magazine

Analysis & Background Stories on International Affairs

The Strategic Importance of India in Today's New Global Order

Article by: Helen Kurvits

This article was published as part of a collaboration with the India China and America (ICA) Institute. Based in Atlanta, GA the ICA Institute provides research on the economies and geopolitics of the three countries and beyond.

From the Old Order to the New World Order

The devastating Second World War led to the creation of a political and economic order aiming for interconnectedness. Most significantly, three international institutions, the World Bank, the International Monetary Fund (IMF), and the United Nations, created a forum for deepening connections between countries, with the overriding goal of avoiding future wars. Yet, the world is changing fast and prompting debates over a “new” world order. The end of the Cold War, the rapid ageing of advanced nations, digitalisation and social media are only a few factors contributing to this change. Now, the focus is turning to Asia in both economic and military terms. The often-cited rise of China and its military expansion in the South China Sea has resulted in attempts to counterbalance China’s increasing power. Both the US and China consider India as strategically important, but with in different ways and with different aims in mind.

India, the US and China – The Three Giants

According to purchasing power parity data from the World Bank, China ($27 trillion) and the US ($23 trillion) are leading the ranking, with India already coming in third at $10 trillion. Notably, India is one of the leaders of the non-alignment movement. When India became independent in 1947, it was reluctant to choose sides during the Cold War and did not wish to align either with the Communist or the Capitalist bloc. The non-aligned movement avoided siding with either of the blocs and advocated for the settlement of conflicts by peaceful means and was formally established in 1961 at the Bandung Conference in Indonesia. The term “non-alignment” itself was coined by Jawaharlal Nehru, then prime minister of India, in 1954.

Dynamic Ties

The Atlanta-based think tank ICA (India, China and America) Institute assesses that ties between India, the US and China are more dynamic than may first appear. The relationships that India has with the US and China have witnessed change within recent years. The US and India have experienced rapprochement. Nowadays, two-plus-two meetings are held where the Secretary of Defence and the Secretary of State come to India and meet with India’s Defense Minister and Foreign Affairs Minister. Moreover, the two are increasingly important trading partners to each other. In contrast, with regards to China, India has distanced itself in recent years, despite recent developments in which India and China were seen as rising together. But will these relations change once again? India is strategically significant to China’s future, but the US has heavily relied on India to counterbalance China’s power.

What Makes India Special?

A recent report by the ICA Institute highlights why India possesses a wide variety of characteristics working in its advantage and enhancing its international competitiveness. Its already vast consumer market is projected to become the world’s biggest by 2030, according to Deloitte. Second, India has an enormous digital talent pool. Due to costs and immigration rules, work in the interconnected 21st century is moving to where the workers are, not the other way round. As this frequently occurs through outsourcing and offshoring it works in favour of India’s labour market. Third, India has the largest global diaspora, with 17.5 million Indians living abroad. Fourth, India enjoys a growing soft power. Its heritage of ancient wisdom and philosophy is known all over the world. Nowadays, its reputation in technology is also contributing to its soft power.  And fifth, India has a strong military power. Let us not forget that India belongs to the “nuclear club”, but it also has a vast army and navy, as well as an increasing capacity in outer space.

Becoming a Second Global Sourcing Destination

India’s characteristics work in its favour in several ways. Importantly, India can provide an alternative sourcing destination. The world has been keen on diversifying its supply chains, as well as its sourcing from China, especially after the COVID-19 pandemic. Questions are being asked with regards to whether the world can depend on China in the long term. Or has a new window of opportunity for India been created? India’s role as the US trading partner has increased. In November 2022, US Treasury Secretary Janet Yellen expressed that India has become an indispensable partner for the United States when speaking at the US-India Businesses and Investment Opportunities event. In 2021, the US-India bilateral trade reached a record of $157 billion, with India becoming the USA’s largest trading partner.

Digitalisation, and again, Digitalisation

According to McKinsey, another possibility for India to enhance its position is to focus on digitalisation which has numerous layers. First, India could speed up its digital infrastructure. That would enhance transparency, record-keeping and governance with its potential to reduce fraud and corruption. Second, India has the potential to become a global hub for technical talent and that includes IT services. Undeniably, the world has become more reliant on technology and this trend is continuing, bearing the question,  is data the new oil? The growth in the IT sector has the potential to improve the socio-economic conditions of many Indians. Between 1998 and 2019, the IT sector’s contribution to India’s GDP rose from 1.2% to 10% and whereas it can largely be attributed to our digitalising world as a whole, it shows the potential contribution to the economy.

Diversity Could Challenge Unity

Nowadays, with the US and China as major powers in our world, India has become an increasingly important player. Its domestic characteristics endow the country with numerous advantages – from its ancient history and philosophy to an enormous consumer market. These advantages can make a difference for India and work in its favour, whether it be by providing an alternative sourcing destination to China or becoming a digital hub.

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