Geo-Economics: The New Frontier in International Politics

• India is increasingly challenged as international politics shifts from traditional geopolitics to geo-economics.
  • Geopolitics refers to the pursuit of power through geography, military strength, and territorial control.
  • Geo-economics refers to the use of economic instruments such as trade, sanctions, investment, and supply chains to achieve geopolitical objectives.
• This shift means economic strength is now as decisive as military power in shaping global influence.

How Geo-Economics Is Reshaping Geopolitics

• Energy and resource diplomacy has emerged as a core geo-economic tool to control critical technologies and inputs.
  • The United States launched the “Pax Silica” initiative, which aims to secure global supply chains for semiconductors, artificial intelligence, and critical minerals.
  • India was excluded from the nine-member Pax Silica group, highlighting geo-economic alignment challenges.
• Weaponization of interdependence refers to exploiting global economic linkages to coerce other countries.
  • The U.S. used financial sanctions by cutting off Russian banks from the SWIFT system, which is a global messaging network for international banking.
• Trade policy is increasingly used as a strategic weapon rather than a commercial tool.
  • The U.S.–China trade war reflects competition for technological supremacy, particularly in semiconductors.
• Geo-economic fragmentation refers to the breaking of global markets into rival economic blocs.
  • The EU’s Carbon Border Adjustment Mechanism (CBAM) imposes tariffs based on carbon emissions of imported goods.
  • CBAM shifts the burden of emission reductions onto the Global South, affecting developing economies like India.

India’s Key Challenges in the Geo-Economic Arena

• India faces a severe mineral and technology gap in the emerging geo-economic order.
  • Despite having a geology comparable to Australia, India has explored only 25–30 percent of its mineral potential.
  • This under-exploration has led to 100 percent import dependence for critical minerals like lithium.
  • Critical minerals are resources essential for renewable energy, electric vehicles, and advanced technologies.
• India’s research and development (R&D) ecosystem remains underdeveloped.
  • India spends only 0.6–0.7 percent of GDP on R&D, which limits technological self-reliance.
  • China and the United States spend 2.5–3 percent of their GDP on R&D, giving them a competitive edge.
• Policy and governance gaps further constrain India’s geo-economic capacity.
  • Bureaucratic red-tapism discourages private sector participation in mineral exploration.
  • Limited private investment slows innovation and supply-chain resilience.

Way Ahead for India in Geo-Economics

• India must actively forge geo-economic partnerships to reduce strategic vulnerabilities.
  • The Supply Chain Resilience Initiative (SCRI) involves India, Japan, Australia, and the United States.
  • SCRI aims to diversify and secure supply chains against geopolitical disruptions.
  • The Global Biofuels Alliance seeks to promote alternative energy cooperation.
  • This alliance offers a geo-economic alternative to fossil fuel cartels like OPEC.
• India must significantly ramp up innovation and R&D spending.
  • The Research Development and Innovation (RDI) Scheme is a step toward strengthening domestic technological capacity.
• Critical infrastructure and connectivity are essential for geo-economic influence.
  • The India-Middle East-Europe Economic Corridor (IMEC) aims to integrate trade, energy, and digital connectivity.
  • IMEC can function as a geo-economic bridge securing India’s trade routes and energy interests.