New Delhi, Jan 31 (UNI) Even as the geopolitical risks remain elevated due to ongoing conflicts in the Middle East, or the Russia-Ukraine conflict, the Government on Friday said the domestic economy remains steady amidst global uncertainties as the real GDP for 2024-25 is estimated to be 6.4 per cent.
Geopolitical risks remain elevated due to ongoing conflicts, which pose significant risks to the global economic outlook. These risks can influence growth, inflation, financial markets, and supply chains, the Economic Survey, tabled in Parliament by Finance Minister Ms Nirmal Sitharaman said.
An intensification of the evolving conflicts in the Middle East, or the Russia-Ukraine conflict, could lead to market repricing of sovereign risk in the affected regions and disrupt global energy markets, it said adding the oil market is well-supplied for now. However, any damage to energy infrastructure could tighten supply, adding uncertainty to the global economic outlook.
Globally, 2024 has been an eventful year. The year witnessed unprecedented electoral activity on the political front, with more than half of the global population voting in major elections across countries. Meanwhile, adverse developments like the Russia-Ukraine conflict and the Israel-Hamas conflict increased regional instability, the Survey observed.
These events impacted energy and food security, leading to higher prices and rising inflation. Cyberattacks also became more frequent and severe, with growing human and financial consequences due to the increasing digitisation of critical infrastructure.
Geopolitical tensions, have reshaped global trade. Geopolitical risks and policy uncertainty, especially around trade policies, have also contributed to increased volatility in global financial markets.
The Survey reiterated that tensions in the Middle East have disrupted trade through one of the critical shipping routes – the Suez Canal. About 15 per cent of global maritime trade volume normally passes through the Suez Canal. In response, several shipping companies have diverted their ships around the Cape of Good Hope, which has increased delivery times by 10 days or more, on average.
These disruptions have led to higher freight rates along major shipping routes, which in turn impact global trade activity.
On the domestic front, the Survey noted that from the angle of aggregate demand in the economy, private final consumption expenditure (PFCE) at constant prices is estimated to grow by 7.3 per cent, driven by a rebound in rural demand. PFCE as a share of GDP (at current prices) is estimated to increase from 60.3 per cent in FY24 to 61.8 per cent in FY25. This share is the highest since FY03.
Gross fixed capital formation (GFCF) (at constant prices) is estimated to grow by 6.4 per cent.. In other words all these indicators assure that the domestic economy remain steady despite Geo-political tensions.
UNI SKB KK