CrossDock Web Exclusive: Dr. Palit on US-India trade relationship and the rewiring of global economic order

CrossDock's interview series has always striven to bring varied voices and perspectives from different fields and parts of the globe to discuss the ever-changing world of global trade and supply chains. In this latest edition, we have Dr. Amitendu Palit, an economist specializing in international trade and investment policies, free trade agreements, and supply chains.

Currently Senior Research Fellow and Research Lead for Trade and Economics at the Institute of South Asian Studies, National University of Singapore, Dr. Palit has spent decades at the intersection of trade, investment, and economic policy — advising institutions ranging from the ILO and the UN Development Program to the World Economic Forum.

Before turning to research, he shaped real-world macroeconomic policy from within the Indian government, contributing to annual economic surveys and budget consultations. He is the author and editor of numerous books on subjects as varied as China-India economics, Special Economic Zones, and the Trans-Pacific Partnership.

In this interview with CrossDock Insights, Dr. Palit talks about Asia's energy crunch, the India-US trade relationship, China's evolving industrial strategy, and where India's real strengths in global trade lie.

Dr. Palit, from your perspective, how severe is the energy shock for the data-center buildout across Asia, and which specific parts of the supply chain do you think are most exposed?

I think one of the issues that countries really overlooked is that if this kind of energy crisis builds up, what are the ways forward? That appears to have been a costly oversight for Asia.

If we include a country like Australia in broader Asia, then we can probably say that it has access to energy, which can help it manage the crisis. A country like Malaysia, or perhaps Brunei, may also be in a relatively better position. But other than these, even the major economies of Asia — Japan, Korea, China, and India — are significantly energy-dependent.

The dependence creates a complication because these economies currently have active industrial policies. When I say industrial policies, I refer specifically to state-driven policies working for achieving certain economic and strategic objectives. If energy prices rise, it can lead to a crisis for these industrial policies.

This is a situation that probably should have been anticipated. One of the areas where this industrial policy focuses, and the impact of the energy crisis becomes important, is for upcoming data centers and AI infrastructure.

For example, when it comes to Google and its investment commitment in India, it has tied up with the Adani Group for power supply. The venture will proceed on the strategy that all the electricity capacity will be provided through renewables. The Adani Group will generate the electricity. This will be off-grid and won’t create additional pressure on the national grid.

Building a hyperscale data center requires enormous amounts of equipment, materials, transport, and commodities to be brought together. The drive for building data centers has been driving global trade due to heavy AI-related goods trade arising largely because of the AI demand from Asia. This trade flow will get seriously impacted by this crisis.

One part of the energy crisis impact will be on the movement of commodities because shipping lines are in great distress. Another part is on creating an all-round impact on how goods move, how they are used, their demand, their volumes, and so on.

At this stage, there is considerable uncertainty about energy prices and supplies. Conditions in and around the Strait of Hormuz are bringing the focus back on the roadblocks that investments are expected to face due to disruptions from military conflicts.