Content

1. Multilateralism à la carte, the Washington way
2. Budget 2026–27 must keep the growth momentum

Multilateralism à la carte, the Washington way

Central Argument

• The US is shifting from rule-based multilateralism to selective, interest-driven engagement.
• Multilateralism is no longer universal or binding, but “à la carte” — chosen when convenient, bypassed when constraining.

Relevance

GS II – International Relations

• Decline of multilateralism.
• Rise of minilateralism.
• Rule-based order vs power politics.
• US foreign policy behaviour.

GS III – Economy / Climate / Trade

• WTO crisis and global trade uncertainty.
• Climate finance commitments.
• Global economic governance fragmentation.

Practice Question

• “Multilateralism is increasingly being practised à la carte rather than as a rule-based order.”Examine this statement in the context of recent US foreign policy behaviour.(250 Words)

What is “Multilateralism à la carte”?

• Selective participation in international institutions.
• Preference for:
  • Informal coalitions
  • Minilateral groupings
  • Ad-hoc arrangements
• Avoidance of:
  • Binding treaties
  • Legal obligations
  • Independent dispute settlement.

Evidence Cited in the Editorial

Withdrawal / Bypassing of Institutions

• US actions:
  • Withdrawal from UNESCO.
  • Exit from UN Human Rights Council.
  • Withdrawal from WHO (Trump era).
• Indicates discomfort with institutional constraints.

Trade & WTO

• US has:
  • Blocked WTO Appellate Body appointments since 2019.
• Consequence:
  • Paralysis of global trade dispute settlement.
• Preference:
  • Bilateral or plurilateral trade arrangements over WTO rules.

Climate Change Regime

• US:
  • Withdrew from Paris Agreement (later rejoined).
  • Resists strong differentiation and climate finance commitments.
• Impact:
  • Weakens trust in long-term climate cooperation.

Security & Strategic Coalitions

• Shift from alliances to issue-based coalitions:
  • QUAD-type arrangements.
• Characteristics:
  • No treaty obligations.
  • No permanent secretariats.
  • Flexibility over commitment.

Washington’s Strategic Logic

• Sovereignty-first approach:
  • Avoids external adjudication.
• Belief that:
  • Institutions constrain US power.
  • Flexibility maximises leverage.
• Domestic drivers:
  • Congressional resistance.
  • Domestic political polarisation.
  • Skepticism towards global governance.

Why This Is Destabilising ?

Erosion of Rule-Based Order

• Predictability replaced by power-based bargaining.
• Weakens norms, treaties, and enforcement mechanisms.

Fragmentation of Global Governance

• Multiple overlapping coalitions.
• No universal standards.
• Increased transaction costs for states.

Crisis Management Weakens

• Global issues need:
  • Binding cooperation
  • Long-term commitments.
• À la carte multilateralism fails on:
  • Climate change
  • Global health
  • Financial stability.

Trust Deficit

• Frequent exits and re-entries undermine:
  • Credibility
  • Reliability of US commitments.
• Allies unsure whether agreements will survive domestic political changes.

Implications for the World

Global System

• Rise of:
  • Minilateralism
  • Informal power blocs.
• Decline of:
  • Universal institutions like UN, WTO.

Developing Countries

• Losers in a power-driven system:
  • Less bargaining power.
  • Reduced protection of international law.
• Increased dependence on major powers.

India-Specific Implications

Opportunities

• India benefits from:
  • Flexible coalitions (QUAD, I2U2).
  • Strategic autonomy.
• Space for issue-based leadership.

Risks

• Weak WTO hurts India’s trade dispute protection.
• Climate finance uncertainty impacts India’s development needs.
• Fragmented order increases diplomatic complexity.

Way Forward

• Need to:
  • Reform, not abandon multilateral institutions.
  • Restore dispute settlement mechanisms.
  • Balance flexibility with rule adherence.
• Middle powers (India, EU):
  • Can act as stabilising anchors.
  • Push for inclusive, predictable multilateralism.

Budget 2026–27 must keep the growth momentum

Core Thesis

• Despite global headwinds, India’s growth resilience is policy-driven.
• Budget 2026–27 must:
  • Strengthen domestic growth levers,
  • Prioritise productive capital expenditure,
  • Maintain fiscal consolidation and debt sustainability,
  • Remove structural bottlenecks.

Relevance

GS III (Economy)

• Budget strategy.
• Capex vs revenue spending.
• Manufacturing, exports, finance, technology.

GS II (Governance)

• Tax administration reforms.
• Regulatory simplification.
• Institutional capacity.

Practice Question

• Why is capital expenditure prioritisation critical for sustaining India’s growth momentum in Budget 2026–27 ? (250 Words)

Context & Background

• 2025 global uncertainty:
  • US tariff threats.
  • Weak global demand.
• India’s resilience attributed to:
  • Reform continuity (PM’s “Amrit Kaal” vision).
  • Infrastructure-led growth.
• Budget 2026–27 seen as a critical inflection point.

Key Policy Priorities Suggested

Defence-led Growth Strategy

• Continue defence capex focus:
  • Capital outlay in defence to reach 30% of total defence expenditure.
• Defence R&D:
  • DRDO allocation to increase by ₹10,000 crore.
• Defence industrial corridors:
  • Existing success: Uttar Pradesh & Tamil Nadu.
  • Proposed expansion: Eastern India defence corridor.
• Export push:
  • Defence exports already ~65% private sector share (2024–25).
  • Target: ₹50,000 crore defence exports by 2028–29.
• Institutional reform:
  • Defence export promotion council.
  • Better coordination with:
    • MEA
    • Indian embassies
    • Ministry of Defence.

Clean Energy & Advanced Manufacturing

• Growth drivers identified:
  • Clean energy
  • EVs
  • Semiconductors
  • Strategic technologies.
• Rising demand for critical minerals.
• National Critical Mineral Mission (NCMM):
  • Approved in early 2025.
  • Objective: Secure mineral supply chains.
• Need for:
  • Dedicated financing.
  • Tailing recovery programmes.

Export Competitiveness & Trade Policy

• Current issue:
  • RoDTEP & Exported Products Scheme funding (~₹18,233 crore) insufficient.
• Recommendation:
  • Significantly raise allocations.
• Rationale:
  • Offset high logistics and compliance costs.
  • Improve price competitiveness.

Global Capability Centres (GCCs)

• India as a global hub for GCCs.
• Existing Transfer Pricing (TP) rules are restrictive.
• Suggested reform:
  • Allow arm’s length margins for different categories of services.
• Impact:
  • Higher exports of services.
  • Greater FDI inflows.

Drone Ecosystem Acceleration

• Need to:
  • Catalyse scale through targeted finance.
• Suggestions:
  • Production-linked incentive (PLI) outlay:
    • Increase from ₹120 crore to ₹1,000 crore.
  • Create ₹1,000 crore drone R&D fund.
• Objective:
  • Boost defence, agriculture, logistics, and exports.

Financial Sector Deepening

• Overdependence on banking credit highlighted.
• Required reforms:
  • Deepen corporate bond markets.
  • Broaden investor base:
    • Listed & unlisted corporates.
    • Insurance companies (raise 25% cap).
  • Encourage:
    • Infrastructure Investment Trusts (InvITs).
    • Real Estate Investment Trusts (REITs).
• Allow provident funds to invest in:
  • Lower-rated but quality bonds.

Tax Administration & Dispute Resolution

• Major bottleneck:
  • Severe pendency at CIT(A) level.
• Issues:
  • Long delays.
  • High litigation uncertainty.
• Proposed solution:
  • Dual-track system:
    • Fast-track for low-value disputes.
    • Detailed adjudication for complex cases.
  • Fill ~40% vacancies at CIT(A) level.

Customs & Tariff Reforms

• Persisting problem:
  • Inverted duty structure.
• Recommendations:
  • Calibrate tariffs across the value chain.
  • Support domestic manufacturing competitiveness.
• Aim:
  • Reduce cost disadvantages.
  • Promote Make in India.

Certification & Regulatory Reforms

• Issue:
  • New companies of existing AEOs face certification barriers.
• Proposal:
  • Allow AEO-accredited groups automatic certification.
• Impact:
  • Faster trade.
  • Reduced compliance burden.

Overarching Economic Logic

• Combine:
  • Fiscal prudence + growth push.
• Strategy:
  • Capex-led growth.
  • Structural reforms.
  • Policy certainty.
• Objective:
  • Crowd-in private investment.
  • Enhance global competitiveness.

Risks Highlighted

• Fiscal overstretch if capex not prioritised.
• Delays in tax dispute resolution eroding investor confidence.
• Weak export support amid global slowdown.
• Financing gaps in new-age technologies.