Editorial Summary: The Hindu argues that geopolitics and economics have converged, nations now use tariffs, export controls, investment screening, and financial sanctions as strategic weapons, not merely economic tools. India, sitting at the intersection of US-China competition and West Asia conflict, must move beyond reactive trade diplomacy and develop a coherent economic statecraft doctrine that leverages its market size, demographic dividend, and strategic location while managing WTO obligations and multi-alignment relationships.

The New Landscape of Economic Statecraft

Traditional economic theory treats trade as efficiency-maximising and politics as a separate domain. That distinction has collapsed:

Tool How Used as Statecraft
Export controls USA controls semiconductor equipment exports (ASML, TSMC) to China; China restricts rare earth exports
Investment screening CFIUS (USA), National Security and Investment Act (UK), India’s FDI rules (border-sharing nations)
Sanctions OFAC secondary sanctions force third-country compliance (India on Iran oil)
Tariffs US-China tariff war; India’s import substitution levies on electronics, solar panels
Technology decoupling “Friendshoring” and “nearshoring” as alternatives to China-based supply chains
Financial sanctions SWIFT exclusion (Russia 2022); USD settlement denial

India is both a target and a participant in this landscape, it faces US pressure on Iran oil and Russia imports while simultaneously using tariffs to protect domestic manufacturing.

India’s Current Posture: “Calibrated Policy Promiscuity”

Former Indian diplomat Shyam Saran coined the phrase “calibrated policy promiscuity” to describe India’s approach: maintaining relationships with multiple, often competing powers simultaneously. This explains:

  • Buying Russian oil while maintaining QUAD membership
  • Hosting the BRICS FM meeting while negotiating ASML technology access with the Netherlands
  • Signing CEPAs with UAE and Oman while the India-GCC bloc FTA remains stalled
  • Joining I2U2 (India-Israel-UAE-USA) while maintaining ties with Iran

The editorial’s argument: This multi-alignment posture is tactically necessary but strategically insufficient. Without a doctrine, a stated set of principles about when and how India uses economic tools as strategic instruments, India is perpetually reactive.

The Case for an Indian Economic Statecraft Doctrine

What a Doctrine Would Include

  1. Offensive tools: Which export controls, investment restrictions, or market access denial India is prepared to use as leverage (e.g., refusing to ratify FTAs with countries that back adversarial states)

  2. Defensive tools: Investment screening frameworks (India’s current rules for border-sharing nations post-2020 are a start); critical sector protection (semiconductors, rare earths, pharmaceuticals)

  3. Institutional capacity: A dedicated Office of Economic Statecraft (analogous to the US Bureau of Economic and Business Affairs or the EU’s DG TRADE economic security unit), currently India’s economic and foreign policy functions are siloed between MEA and MoCI

  4. Red lines: Explicit conditions under which India would apply economic coercion, and conditions under which it would resist external coercion

India’s Structural Advantages

Advantage Strategic Leverage
1.4 billion consumers Market access is a powerful bargaining chip; multinationals will make concessions for India entry
$500+ bn IT/services exports Technology services = strategic relationship (USA, Europe deeply dependent)
Global South leadership India as BRICS chair and G20 past president can shape agenda for 130+ developing nations
Geostrategic location IOR centrality; IMEC corridor; connecting Atlantic to Indo-Pacific
Pharma “pharmacy of the world” COVID vaccine diplomacy showed this leverage; generic medicine exports to 200+ countries

WTO Constraints: The Trade-Off

A formal economic statecraft doctrine creates friction with WTO obligations:

  • GATT Article I (MFN): Most-favoured nation treatment; India cannot give better terms to one country without extending to all WTO members (with exceptions for FTAs/RTAs)
  • GATT Article III (National Treatment): Cannot discriminate between domestic and imported goods post-entry
  • GATT Article XI: No quantitative restrictions on exports (India has faced WTO challenges on agricultural export bans)
  • Agreement on Safeguards: Temporary measures require injury proof

India has used Article XXI (National Security Exception) to justify some restrictions, but overuse can undermine the rules-based trade system India benefits from.

The editorial’s nuanced position: India should use the national security exception strategically and sparingly, reserving it for genuine security interests rather than industrial policy, and should invest in building multilateral coalitions (through BRICS, G20, WTO reform) that rewrite the rules to accommodate legitimate statecraft.

UPSC Mains Analysis

GS Paper 2, International Relations

Key arguments:

  • India’s multi-alignment strategy needs an economic backbone, diplomatic relationships without economic leverage are incomplete
  • The failure to ratify RCEP was an instinct, not a doctrine, a doctrine would provide a framework for such decisions with stated rationale and compensation mechanisms
  • Economic statecraft requires institutional capacity (dedicated offices, intelligence-trade interface) that India currently lacks

GS Paper 3, Economy

  • Export controls, investment screening, and tariffs as economic tools: costs (efficiency loss, retaliation risk) vs. benefits (strategic leverage, domestic industry protection)
  • India’s trade deficit and import dependence reduce its coercive leverage; building export surpluses and reducing critical import dependencies is a prerequisite for effective statecraft

Keywords: Economic statecraft, policy promiscuity, multi-alignment, OFAC secondary sanctions, CFIUS, Article XXI WTO national security exception, export controls, investment screening, IMEC, I2U2, BRICS, India-GCC FTA.

Editorial Insight

The Hindu’s argument is about institutional design: India’s foreign policy machinery was built for a world where trade and politics were separate. The new world, where the US weaponises the dollar, China weaponises rare earths, and Europe weaponises regulatory standards, requires a different architecture. A formal economic statecraft doctrine would transform India from a country that reacts to economic coercion to one that can credibly deploy and deter it. The question is not whether India should play this game, it already is. The question is whether it wants to play it with a strategy or without one.

Source: Trade as Strategy: India Needs a Formal Economic Statecraft Doctrine — Ujiyari.com | Free UPSC & State PCS Editorial Analysis