India and Global Economic Governance: From Structural Conflict to Embedded Liberalism

Abstract

India's behavior in the global economy has transformed considerably, consistent with its embrace of economic globalization and deregulation since 1991. Until then, India had practiced a type of economic engagement that Stephen Krasner (1985) characterized as structural conflict. Its capacity to tax citizens was dismal. Its trade as proportion of gross domestic product (GDP) hovered around 16% in the 1980s, impeding growth. And, economic resources were redistributed authoritatively rather than through trade. India, like many developing countries, was locked in economic conflict with the West until the 1980s. Since then, it has embraced global economic integration, contributing to surging economic growth. An economy that grew at an average of 3.5% between 1956 and 1975 has grown at more than 6% since 1980 and over 7% since 2004. India is one of the fastest growing economies in the world after China, and the gap between the two countries is shrinking. In this paper, I argue that the transition from structural conflict to what John Ruggie (1982) described as embedded liberalism is the key to India's tryst with globalization. Embedded liberalism has driven the country to make decisions to spur growth and welfare within a secure international environment. Whether or not the BRICS will evolve as a coherent group will depend to a great extent on the texture of Sino-Indian relations. While structural conflict characterized Third World behavior, especially that concerning the demand for a New International Economic Order, there was nothing inherently antithetical in India's state–society relations that impeded its embrace of the global economic order. Rather, if India was locked in structural conflict with a liberal economic order on a variety of trade and financial issues until the 1980s, it was because this was what the government considered the most prudent strategy of global economic integration. When the government viewed …