Navigating economic uncertainty: A global and Indian perspective

The global economy is grappling with challenges posed by volatile financial markets, rising interest rates, and geopolitical turbulence. These factors are reshaping economic interactions and heightening uncertainties, as highlighted in a recent conclusions paper by IMA India.

Global shifts and market volatility

The US Federal Reserve’s aggressive rate hikes have significantly impacted emerging markets, including India. By narrowing interest rate differentials, these hikes have prompted capital outflows to safer US assets, pressuring currencies such as the Indian rupee. However, this trend could stabilise if the Federal Reserve continues to lower rates. Meanwhile, the US economy shows signs of a slowdown, with tapering consumption and rising unemployment rates signalling potential market corrections.

India’s resilience amid global risks

In contrast, India remains a bright spot with a projected growth rate of 7% for fiscal 2025, outpacing most major economies. A robust domestic market and favourable demographics bolster its prospects. However, long-term growth is threatened by high public debt, now at 90% of GDP, and a complex regulatory environment. Structural reforms in taxation and governance are imperative to sustain momentum and attract foreign investment.

Geopolitical realignments

Geopolitical risks loom large, with US-China tensions over technology and trade likely to persist. Protectionist policies in key markets, including Europe and the US, threaten the liberal economic frameworks of the past, redefining global trade and investment flows.

Commodities and investment outlook

As interest rates stabilise, commodities like copper and gold are set to gain. Copper’s role in the green energy transition and central banks’ appetite for gold as a safe haven underline shifting investment trends.

This article draws on insights from the conclusions paper of the IMA India’s recently-held CEO Forum meeting, which included valuable discussions with Adit Jain, Chairman and Editorial Director, IMA India.