The 75 years of relatively broad global peace post the Second World War was characterised by an evolving rule-based order and a neoclassical economic regime grounded in free-market principles, the interplay of supply and demand, and allocative efficiency in markets. In the bipolar world that emerged, global governance institutions such as the United Nations (UN) and the World Trade Organisation (WTO), despite being dominated by some major players, played important roles in anchoring efforts and managed to bridge differences between nations in trade and non-trade disputes.

The economic regime dominated by the Washington Consensus and David Ricardo’s theory of comparative advantage led the world to a freer flow of capital and goods. It culminated in what economists describe as the “period of great moderation”, roughly from the mid-1980s to 2007, distinguished by low inflation, stable growth, and reduced macro-economic instability. Most nations prospered, and millions of people across geographies were lifted out of abject poverty. The global liberal economic order also built other economic powerhouses, most notably China. 

The collapse of the Soviet Union in the 1990s led to the emergence of a unipolar world, bringing in its wake unilateralism and nonchalance, even disregard, for global governance institutions.

Challenges to Economic Order 

The rise in income levels across the globe was, however, accompanied by increasing inequality within and between nations, which, in many cases, has led to right-wing politics and economic nationalism, posing challenges to the new world economic order. The effect has been more pronounced in the regions endowed with natural resources that drive the world economy. It has also led to an ambition to be part of what might be an emerging, new multipolar world. The world is witnessing a race to supremacy and that race has overshadowed geopolitical peace.

The intensifying power rivalries, erosion of multilateral norms, and decline of the rule-based order are giving rise to growing uncertainty, which threatens to undo the gains of a rule-based international order.  The recent hegemonic incursions pose a serious threat to stability, the bedrock of economic development. Mitigating the socioeconomic and political uncertainties and saving humanity from the vagaries of a riotous world requires a stabilising force. 

Coalition of Middle Powers 

Middle-power countries have an opportunity to bring equilibrium in international relations by forging coalitions, promoting cooperation and multilateralism, and adhering to a rule-based order that reduces unpredictability.

India is uniquely placed to lead a coalition of democratic ‘middle powers’ committed to preserving and strengthening such an international order.  Firstly, India is widely recognised as the world’s largest yet vibrant and living democracy and an emerging economic power. Secondly, India has always stood for respect for sovereignty, non-aggression, and peaceful resolution of disputes. India has been balancing diplomatic neutrality with pragmatism notwithstanding some recent transgressions of the international order. Several global commentators have advocated India’s role in restoring international order. Thirdly, India’s credentials are grounded in solid structural and institutional factors: a pluralistic political system that has consistently enabled the peaceful transfer of political power, a constitution that upholds the rule of law, efficacious governance, and a rule-based international order.  Fourthly, India’s geographic location at the crossroads of South Asia, Central Asia, and the Indo-Pacific enhances its strategic advantage, as it is central to major global trading routes and security dynamics. Finally, as the fastest-growing major economy with increasing technological capabilities, India has the capacity to influence global supply chains, digital governance, and developmental cooperation.

Middle-power leadership can be built on cooperation, accommodation, and mutual respect, rather than dominance, coercion, and brutal self-interest seen recently. India has signed several bilateral trade agreements with countries like Australia, the UK, and the EU, in the spirit of cooperation, understanding, and mutual respect. These countries have been advocating multilateralism and respect for the international rule of law. As an important middle power, India can be a “bridge” connecting the developed and developing world, and the Global North and Global South.

The new coalition should focus on revitalising and strengthening multilateral institutions such as the UN, WTO, and WHO, and making them more equitable. The reform of the U.N. Security Council should dominate India’s diplomatic agenda, with a focus on broader representation to reflect contemporary realities of global governance and peace. Simultaneously, India must deepen its engagement with plurilateral groupings such as the G20, BRICS, and the Quad.

Assuming Strategic Leadership 

The ongoing turmoil has evoked strong advocacy from several countries for a rule-based international order free from personal predilections. India should partner with countries such as Australia, Brazil, Japan, Indonesia, South Korea, South Africa, and the EU on issue-based areas, including climate change, maritime security, cyber governance, and supply chain resilience. Initiatives like the International Solar Alliance bespeak its strength.

Assuming leadership requires both inherent strength and ideological positioning. While the world covets India as a market, India should also become a market leader in strategic areas where it needs to be self-reliant and has export potential. These include space, defence, aeronautics, AI, semiconductors, and skilled manpower. India must leverage economic diplomacy and soft power - cultural diversity, democratic resilience, civilizational heritage, and non-aggression - to promote international confidence and trust. Trade agreements and fast-paced domestic reforms will support that initiative.

Assuming leadership among middle powers will involve overcoming several challenges -- infrastructure gaps, economic inequality, and governance challenges, to name a few. Balancing relations with existing superpowers, especially in conflict situations, will have to be navigated with prudence and dexterous diplomacy. In the global landscape of fragmentation, perpetual crisis, economic pain, and conflict,

India stands at a pivotal moment when hegemonic transgressions seem to have prevailed over ideology. India must leverage its inherent and potential strength to seize the moment and play a defining role in constructing a stable, inclusive, and rule-based international order.

(Bajpai is a former Chairman of SEBI and LIC India. Tiwari is a former Deputy Comptroller and Auditor General and Member, NFRA, India. Views are personal. By special arrangement with The Billion Press)