Developing countries, including India, should focus on diversification in their trade and energy mix and use their collective voice to guard against energy shocks and protect their interests against unilateral action by large global powers, Shaktikanta Das, principal secretary-2 to Prime Minister Narendra Modi, said on Tuesday.
“Global South economies possess a substantial share of the world’s critical minerals, natural resources, agricultural commodities, and youthful human capital,” Das said at an event organised by Research and Information System for Developing Countries (RIS) and Delhi School of Economics (DSE) here on Tuesday.
“While individual countries often have limited influence in international economic negotiations, their collective voice can constitute a powerful force in shaping global economic outcomes,” Das said.
Greater cooperation among global south nations can enhance their bargaining power in areas such as trade, climate finance, technology transfer, supply chain integration, and reform of global financial institutions, Das added.
“These countries can use their collective voice at various global platforms to protect their interest vis-à-vis unilateral action by large global powers,” Das said.
Unilateral tariffs imposed by the US administration under President Donald Trump and the Iran war have roiled the global energy market, more adversely impacting resource-poor developing countries. Recently, Trump signed new legislation enabling Washington to impose tariffs up to 100 per cent on imports from countries that source majority of their energy requirement from Russia.
India imports over 80 per cent per cent of its crude oil needs and Russia continued to be the largest source of crude oil for India in September so far, Business Standard reported on Monday.
Das said the recent conflict in the Middle East has underscored the vulnerability of the Global South economies to energy shocks, with energy-importing countries bearing the brunt through higher fiscal pressures and strained foreign exchange reserves.
“The lesson is clear – diversification of energy mix can reduce vulnerability and strengthen domestic resilience. Renewables and biofuels can enhance energy security and economic stability,” he added.
The price of Indian basket of crude oil has increased sharply to over $116 a barrel in recent weeks due to heightened geopolitical tensions and supply disruptions in West Asia. The average price of Indian basket of crude was $66 a barrel last year.
Das said the Global South is increasingly confronted with a tough fiscal and monetary balancing challenge amidst conflict-induced cost surges and the need to protect local populations from energy and commodity price shocks.
“This may result in elevated indebtedness, tighter monetary conditions and increased debt servicing costs. Global South economies should therefore adroitly manage this balancing act by undertaking fiscal and structural reforms in the real sector,” Das added.
Das said decline in the costs of cross-border transactions have allowed global supply chains to gradually integrate developing countries into production networks.
“For countries in the Global South, this calls for pursuing policies that strengthen competitiveness, reliability and efficiency of their firms; more so because today they have to contend with trade barriers and tariff challenges.”
Das said investments in people and infrastructure, an open, business-friendly regulatory framework and private investments would mutually reinforce and aid job creation.
Speaking at the event, Ram Singh, Director, DSE highlighted the need for building on the country’s strengths. “We have to ask and address this question in a world where established global powers take an approach that is protectionist and occasionally extortionary,” he added.
