The global economic system since the nineties. was based on relatively depoliticised trade and finance relations.  It led to a substantial acceleration in growth in China and significant rise in India. There was some concern about the openness that emerged with the extraordinary dominance of China in manufacturing production and trade and, to a lesser extent, with the rise of India. But the big change has come now with Donald Trump becoming the US President

The era of significantly depoliticised globalisation with rising links between developed and emerging market economies is giving way to a system where inter-country relations, even in trade, technology and commercial finance are linked with security, and strategy considerations.  This is leading to a degree of nationalism and even mercantilism particularly by the USA, which is setting political constraints on global trade, supply chains and even finance.

In many ways this change was captured by the Prime Minister of Canada, Mark Carney who in his famous Davos speech said “Great powers have begun using economic integration as weapons, tariffs as leverage, financial infrastructure as coercion, supply chains as vulnerabilities to be exploited,” I think his reference to the great powers was basically to Trump's USA.

In such a complex world it is difficult to forecast behaviour by foreign Governments or, for that matter, of global financial or manufacturing corporations.  Hence it is not right to design policy on forecasts based on the assumption that the present pattern of global disquiet would continue. What we need is an analysis that will indicate a set of likely possibilities- whether the present relationship pattern will continue, whether new patterns will emerge, whether the strong assertion of power by the USA or other great power will change. Our policy has to be designed not with any forecast of the global economy but as a policy that can be redesigned quickly depending on which scenario works out.  In a large country like India the Government can also consider the role it can play to directly influence global prospects.

This stress on scenarios rather than forecasts or projections has been focussed by what we are experiencing with the rising isolationism and unilateral power exertion by the USA under Donald Trump. Francis Fukuyama, who wrote the famous book Trust: The Social Virtues and the Creation of Prosperity, now says: " If I were to re-write Trust today, I would not characterize the United States as a high-trust society." What Fukuyama is saying in effect  tells us that our global relation’s policy should not be based on trust but on an assessment of potential action and response by key global partners. Since these actions are not accurately predictable it is best to work out scenarios and design policies that are quickly adjustable.

This focus on potential scenarios is most important for our link with the great powers. Consider the issue of trade and finance.  The three major partners of India are USA, Europe and China.  Our trade relation ship with them in 2024-25 amounted to about $380 billion which is about one-third of our global trade.  If one were to add the share of USA and Europe in net services trade, remittances and investment payments the proportion would be higher

To take first perhaps most relevant example which is the trade and finance relationship with USA.  Two alternative scenarios of USA global policy beyond 2029 depends on whether someone who is a supporter of the policies of Trump is elected as President or whether someone who is an opponent is elected. In fact, one has to go a little further and assess whether the isolationist and aggressive policies about trade and multilateralism that is the basis of US policy reflects emerging opinion amongst US citizens. Design a policy that is able to cope with the current attitude of the US government but is flexible enough to take advantage of a new government that is less isolationist, more willing to de-politicise its trade policy and less demanding in its control over the global activities of its manufacturing and finance corporation.

A similar scenario-oriented policy design approach is even more necessary for the other great power, China.  a globalizing control entity.  Will China continue with its trade restrictions on important commodities like rare earth products or will the tension in its relationship with USA lead it to reduce the restrictions with other countries? Will the political control over its global trade policy continue or will it be diluted by the growing global presence of its private corporations? Is there a prospect of China becoming a substantial destination of our exports? Should we liberalise Chinese finance flows? There are other similar questions which need to be set, and a policy approach designed to be flexible enough to cope with changes in China.

The scenario building in the relationship with Europe is important because we are relying substantially on better trade relationship with Europe and UK with the new FTA agreements that we are moving towards.  There is also an emerging sign of the European States moving away from USA.  In fact, recently when the USA grossly misbehaved in the summit of the G7 states and refused to admit one of them, Canada, the four European States and Japan walked out.  France, holding the G7 Presidency at present has not formally called for a permanent "G7 minus USA" structure. However, French President Macron has proactively expanded the 2026 G7 summit to include India, South Korea, Australia, Brazil, and Kenya to "correct global economic imbalances" and foster cooperation among democracies.  The scenario that is most plausible now is Europe as a substitute for USA in many areas of trade and finance. But our policy should also consider the scenarios that would arise if Europe's relations with Russia worsen further or if Europe reconnects with the USA

I have focussed attention largely on the trade and finance and technology access issue. But there are scenarios necessary even more for the political and defence relations. This is a more complex requirement as the political and defence relationship is inherently politicised and is not answered in this article.

Scenarios can include possibilities which at present are not obvious.  In 1987 anyone looking five years ahead for a projection forecast would not have forecast that communism would collapse in the Soviet Union, that two Germanies would unite under the Christian Democratic party government in West Germany and that apartheid would end in South Africa and Nelson Mandela would emerge as the President of South Africa. At that time these three dramatic developments did not look likely but did look possible. All these three things happened and that explains why multiple scenario projections are more effective than forecast projections for designing policy. If we had prepared a scenario which included some such possibilities, then we would have anticipated the collapse of the nature of our trade relationship with Russia and the new prospects in South Africa. That is why the Government should launch a dialogue among experts and bureaucrats that would outline possible scenarios of global economic relationship rather than attempting excessively precise forecasts.