India and the Pitfalls of Geoeconomics: Borrowing the Wrong Playbook

The Lift Line

“When the great powers turn trade into a weapon, the temptation is to arm oneself the same way. But a developing economy that copies the tactics of the powerful, without their power, may only wound itself.”

The world has entered an age of geoeconomics, where tariffs, export controls, investment screening and industrial subsidies are wielded as instruments of strategic competition. The United States and China are rewriting the rules. The pitfall for India is to assume that what works for the strong will work for the still-developing. This editorial argues that India must weigh its own interests and defend strategic autonomy in trade, not imitate a playbook built for great-power leverage it does not yet hold.

Why This Editorial Matters for Your Exam

GS Paper 3: Effects of liberalisation on the economy; changes in industrial policy; India and international trade; investment models. It also links to GS Paper 2 through India’‘s foreign policy, strategic autonomy and the effect of developed-country policies on India’'s interests.

This theme lets you connect trade policy, industrial strategy, China dependence and foreign policy into one integrated argument, ideal for both a trade-economics and an IR-flavoured Mains answer.

Background and Context

Geoeconomics, a term popularised by strategist Edward Luttwak in a 1990 essay and developed by Robert Blackwill and Jennifer Harris in War by Other Means (2016), is the use of economic instruments to promote national interests and produce geopolitical results. Its tools are tariffs, sanctions, export controls, investment screening and industrial policy.

The great powers have leaned in:

• United States: reciprocal tariffs (announced April 2025), the CHIPS and Science Act (2022), the Inflation Reduction Act (2022), semiconductor export controls under a small yard, high fence doctrine, and CFIUS investment screening. Following a February 2026 interim deal, the US reciprocal tariff on India stands at about 18 per cent.
• China: successive rare-earth and critical-mineral export controls, the broadest issued in 2025, plus industrial targeting under Made in China 2025.

Both act from structural market power. China controls most rare-earth processing; the US controls advanced chips and the reserve currency.

The Core Argument / Issue

The central claim is that India, a developing economy without equivalent market power, risks self-harm if it uncritically borrows these instruments rather than tailoring policy to its own interests.

India Has Already Started Mirroring

Press Note 3 (2020) required prior government approval for all FDI from land-border countries, aimed at Chinese takeovers. But in March 2026 the government eased it for small, non-controlling stakes, an admission that screening had starved a capital-hungry economy of needed investment.

Why Imitation Is Riskier for India

India lacks a genuine chokehold over global inputs. Meanwhile it runs a record trade deficit of about 112 billion dollars with China (FY2025-26) and depends on Chinese inputs for electronics, pharma ingredients and solar. In a tit-for-tat, input cutoffs would hurt India more than India could hurt others. India also needs foreign capital and technology to grow, so heavy screening and high tariffs raise consumer and producer costs and deter investment.

Strategic Autonomy in Economics

India’'s foreign-policy doctrine of strategic autonomy and multi-alignment, engaging the US, managing China, cultivating Europe, reassuring Russia, must extend to trade. Being non-West without being anti-West means choosing instruments by national interest, not by copying either Washington or Beijing.

The Honest Counter

In a weaponised world economy India cannot be defenceless. Industrial policy, targeted screening and anti-dumping are legitimate development and security tools, and some geoeconomic capacity is insurance against coercion. The argument is not against all tools, but against reflexive imitation of great-power strategy.

How to Think About This (Analytical Frame)

Match the instrument to your leverage, not to your rival’'s. A geoeconomic tool is only as good as the market power behind it. China’'s export controls bite because it controls processing; US controls bite because it controls chips and the dollar. Before India reaches for a tariff or a screen, ask: do we hold the chokepoint, or does the other side? Where India is the dependent party, aggressive instruments invite retaliation it cannot absorb. Use tools where India has leverage; build competitiveness where it does not.

The Diagram in Words

Geoeconomics = economic tools for geopolitical ends (Luttwak 1990) -> US: reciprocal tariffs + CHIPS Act + IRA + export controls + CFIUS (small yard, high fence) -> China: rare-earth export controls + Made in China 2025 -> both act from structural market power -> India copies: Press Note 3 screening + anti-dumping + QCOs + PLI (~Rs 1.97 lakh crore) -> but India lacks chokehold leverage + runs ~112 billion dollar deficit with China + depends on Chinese inputs + needs foreign capital -> imitation invites retaliation India cannot absorb + raises costs -> pitfall = copying the powerful without their power -> fix: selective defensive tools + domestic competitiveness + FTA diversification + strategic autonomy and multi-alignment

Way Forward

1. Use tools selectively and defensively. Reserve screening, tariffs and controls for genuine security cases where India holds leverage, not as a general template.
2. Prioritise competitiveness over protection. Address logistics, energy and regulatory costs so Indian industry wins on strength, not walls, and avoid layered QCO-plus-tariff protection that raises costs.
3. Diversify partners and supply chains. Deepen FTAs (India-UK CETA, India-EFTA TEPA, the US interim deal) and the China-plus-one shift to reduce single-source dependence.
4. Protect strategic autonomy. Judge every geoeconomic instrument against India’'s developmental interest, keeping multi-alignment and openness to capital central.

PYQ Linkage and Practice

• UPSC GS3 (2021): “‘Investment in infrastructure is essential for more rapid and inclusive economic growth.’ Discuss.”
• UPSC GS2 (2020): “‘Indian diaspora has a decisive role to play…’” (economic diplomacy framing)
• UPSC GS3 (2018): “Comment on the important changes introduced in respect of the Long-term Capital Gains Tax…” (policy-instrument reasoning)

Practice Mains question (250 words, 15 marks): “Geoeconomics has become the grammar of great-power competition. Critically examine whether India, as a developing economy with limited market power, should copy the tariff, export-control and investment-screening instruments of the US and China, or pursue strategic autonomy in trade policy.”

Sources: Business Standard, Ministry of Commerce and Industry, PIB

Source: India and the Pitfalls of Geoeconomics: Borrowing the Wrong Playbook — Ujiyari.com | Free UPSC & State PCS Editorial Analysis