Economic Survey 2024-2025 Raises Concerns

It must be said without any ambiguity that the Economic Survey of India for the period 2024-2025 has not only given the present status of Indian economy but has situated the Indian economy in the on-going global volatility in terms of geo-politics. In the preface to the survey it has been made abundantly clear that 2024 was a year of elections that created new power centres having an impact on the business and policy formulations. Though in India, the voters installed the Narendra Modi led government for the third consecutive terms but elsewhere in other parts of the globe where elections were due; generated surprises. The survey underlines the elections of America and Indonesia. This has immensely changed the American policy towards the business transactions with the other nations leading to global movement of goods and people. Europe is also engulfed with economic and political uncertainties. Germany explains this desperation as its economy is experiencing contraction for the last two successive years. Same applies to France .United Kingdom (UK) has also witnessed the change of regime as the Labour Party has taken the reins of power amid the slowing down of economy and fiscal pressure. The survey makes it clear that Europe is facing competitiveness pressures amidst much higher energy costs caused, in part, by the transition towards renewable energy. And that must concern all economies worldwide as these developments have affected the global economy. The Index of Global Economic Activity of the Federal Reserve Bank of Dallas has been volatile since the pandemic began slowing at the end of 2023.We have recently witnessed the desperation of the newly elected Trump government in the United States(US) when it comes to facing the emerging Chinese economic challenge. The tariff war started by the US has created a new economic space that will alter the supply-demand relationship and alter supply chains and hence, the value chains as well, forcing the policy makers to recalibrate the economic order. It can cause inflation or even recession if the US orchestrated economic onslaught is not faced with an alternative model. It is clear that this is an age of new warfare where wars are fought by other means and economy is the new weapon of this warfare. China has expanded its warfare by bringing in economic aggression and adding to its military might. It will not be an exaggeration to say that both the US and China have drawn the battle lines that extend beyond the geo-strategies and military warfare .The US is trying to take out Russia from the strategic orbit of China as it did in the cold war era when the USSR was in direct line of fire with it. Thus the economy is the new battle ground and as such India cannot ignore it. It will have to re-engineer its policy formulations and work for the capacity building in this new world order where geo-strategic architecture will be defined by economic warfare. To give thrust to the Indian economic policy in this direction, the survey clearly underlines that the reopening of the Chinese economy after the Covid shutdown has not led to a spurt in economic growth rate as overcapacity and financial strains in the real estate sector have come to the fore. Due to weak aggregate demand, the economy is in deflationary mode. The absence of a significant policy stimulus to boost domestic consumption means excess capacity spills over into external markets. Chinese exports are thriving. China’s trade surplus in 2024 was nearly one trillion US dollars. The concerns raised by the Economic Survey for the period 2024-2025 are genuine and indicate direction that must be taken by the Indian economy to deal with the winds that are blowing across the Atlantic and the Indo-Pacific to keep the national economic health robust.A word to wise is enough.