Model Answer

The World Economic Forum’s Global Risk Report 2026 identifies geoeconomic confrontation as the most significant global risk in the immediate and short-to-medium term. Geoeconomic confrontation refers to the deliberate use of economic instruments by states to achieve geopolitical and strategic objectives. These instruments include tariffs, sanctions, export controls, investment restrictions, subsidies, state aid and currency measures aimed at reshaping cross-border flows of trade, technology, capital and knowledge.

The growing prominence of geoeconomic confrontation reflects a shift from cooperation-based globalisation to strategic competition-driven economic relations. Recent examples include the imposition of tariffs and technology controls by the United States and restrictions on the export of critical minerals by China. Such measures signal the increasing weaponisation of interdependence in the global economy.

Its implications for global governance are far-reaching. First, it undermines multilateral institutions such as the World Trade Organization, as rule-based dispute resolution gives way to unilateral and bloc-based actions. Second, it leads to fragmentation of global supply chains, particularly in strategically sensitive sectors like semiconductors, pharmaceuticals, energy and rare earths. Third, concentration of critical technologies and resources within competing geopolitical blocs raises the risk of economic instability, inflationary pressures and state-based conflicts, thereby weakening global economic resilience.

For developing economies like India, geoeconomic confrontation presents both challenges and opportunities. On the negative side, restricted access to advanced technologies, capital flows and export markets can impede growth and deepen inequalities. The report also highlights India’s exposure to cyber insecurity, insufficient public services and social protection gaps, which may be aggravated by global economic disruptions. Additionally, supply-chain shocks and trade uncertainties can adversely affect employment and macroeconomic stability.

However, the evolving global landscape also creates opportunities for India. Supply-chain diversification and the search for trusted and resilient partners position India as an alternative manufacturing, digital and services hub. Initiatives such as Make in India, PLI schemes and infrastructure expansion can help India integrate into reconfigured global value chains.

In this context, India must pursue a calibrated strategy that combines strategic autonomy with economic engagement. Strengthening multilateral platforms, diversifying trade partnerships, investing in domestic resilience, and enhancing technological and cyber capabilities are essential for navigating an era of intensified geoeconomic confrontation while safeguarding long-term development goals.