Age of Geoeconomics: Power Through Trade and Technology

In the new Cold War, India must navigate battles fought not with military might, but through chips, trade routes, and digital platforms.

Today’s world order is shaped less by ideology or alliances and more by economic tools used for strategic gain. Shipping lanes, data centres, and semiconductor fabs now matter as much as aircraft carriers. This “age of geoeconomics” is evident in how powers restructure trade, control supply chains, and set technology standards. For India, it offers a chance to be a trusted link in global value chains but also the risk of being squeezed between rival blocs.

Geoeconomics is the use of tools like tariffs, subsidies, export controls, investment rules, and infrastructure finance to advance strategic goals. Unlike the Cold War, driven by military containment, today’s rivalry plays out through chips, trade routes, and digital platforms.

This is not a theory. The US has curbed semiconductor exports, the EU calls for “strategic autonomy”, China advances Belt and Road, and India pushes “Make in India” and digital diplomacy. The common aim is de-risking—reducing vulnerability to sanctions, pandemics, cyberattacks, or conflict. In practice, that means reorganising supply chains, creating new financing tools, and protecting critical economic nodes.

Managed Interdependence

The US is reshoring key industries, subsidising local production, and tightening tech export controls. “Friendshoring”—shifting output to allies—captures its approach. The aim is not to decoup fully from China but to maintain “managed interdependence”: keeping trade while ring-fencing strategic technologies. The CHIPS Act and subsidies for EVs and renewables reflect this strategy.

Europe openly speaks of “de-risking from China”. Its strategy mixes stricter investment screening, supplier diversification, and major spending on renewables, batteries, and semiconductors. Moves like the European Chips Act aim at technological sovereignty. Yet Europe also seeks distance from the US in areas such as digital standards, data rules, and defence procurement.

China dismisses Western de-risking as protectionism. It has doubled down on Belt and Road corridors and pushed its “dual circulation” strategy—boosting the domestic economy while still drawing on trade and investment. China remains central to supply chains, from solar panels to pharmaceuticals, making it hard to bypass. Yet this dependence also leaves it vulnerable to collective diversification, rising mistrust, and falling foreign investment. If de-risking accelerates, China may lean more on domestic demand and Global South ties—perhaps explaining its warmer stance towards India.

Capability Building

For India, geoeconomics is both a chance and a test. Its “multi-alignment” engages the US, EU, Russia, and China to avoid reliance on any bloc. Tools include Make in India and PLI schemes to boost manufacturing, digital infrastructure exports as affordable alternatives to Western platforms, and connectivity projects like Chabahar port. Cultural diplomacy—from Buddhist relics to educational exchanges—also helps build trust and economic ties.

The upside is clear: as firms diversify from China, India is a natural choice. Supply chains are shifting to “China + many”, with India gaining share. In aerospace and defence, players like Airbus are exploring deeper ties. In digital payments, India’s UPI is expanding to Southeast Asia and Africa, turning digital diplomacy into economic leverage.

Yet challenges persist. India lacks the technological depth to replace China, with key sectors—electronics, advanced manufacturing, and rare earths—still import reliant. Infrastructure gaps, regulatory uncertainty, and cost issues further constrain its ability to absorb major supply chain shifts.

Moreover, India risks getting caught in external disputes. The US proposal for high H‑1B visa fees hits Indian IT firms, while EU trade frictions over data and environmental rules add complexity. Here, reliance on external markets becomes a vulnerability.

Domestic capacity is uneven. Pharmaceuticals and services are strong, but manufacturing scale remains limited. India’s global electronics exports are small, and supply chain integration lags behind Vietnam or Mexico. Without bold reforms in logistics, taxation, and labour, converting external interest into industrial relocation will be difficult.

The debate over de-risking involves trade-offs. Overly aggressive reshoring could fragment trade and raise costs, while ignoring risks leaves states exposed. Likely, we will see partial diversification: supply chains rewired, not dismantled.

For India, this offers opportunities in pharma, renewables, and digital platforms, but not a wholesale shift from China. Success depends on providing scale, reliability, and a stable regulatory environment and integrating with other emerging economies to offer regional alternatives.

The global economy is entering an era where redundancy, resilience, and regionalisation matter more than efficiency, affecting inflation, growth, and jobs. For India, the challenge is capturing investment gains without being trapped by higher costs or geopolitical friction.

(The writer is a foreign affairs expert. Views personal.)