The ongoing geopolitical turmoil in various parts of the world, coupled with tariff-related overhang may weigh on global growth for many years, with its average impact possibly greater than the 2008 global financial crisis, Chief Economic Adviser V said on June 18 in Thiruvananthapuram.
The World Bank had recently forecast that the global growth could fall to its lowest level since 2008.
"Right now it may be premature to say that the current situation could match the impact of the 2008 global financial crisis... We may not have a big growth drop like it happened in 2009 globally... This time, it could be a slow-moving event that lasts several years. In some sense, its average impact may be more than the 2008 global crisis, but it will be spread out over many years," Nageswaran said.
In this context, India's growth of 6.5% during FY25 has been good, and the gap with global growth is now much higher than even during the years of the global financial crisis, the CEA added. "Economic and political conditions have become unfavourable for growth... Given these situations, the Indian economy has maintained a good growth rate in 2024-25 at 6.5%."
The CEA added that conflicts and disruptions on the global scene have been around since 2022 but have become more intense and unpredictable, which makes the overall environment - political, economic or militarily - more difficult for growth.
"You could say that downside risks are higher than the potential for upside surprises," Nageswaran said, in response to a question on whether the turmoil could impact India's economic growth.
However, the CEA added that India's efforts towards energy security are under-appreciated, given the ongoing conflicts in the world, including in West Asia, between Ukraine-Russia, and the ongoing tariff curbs on global trade. "Even after the Russia-Ukraine conflict, India managed to strike a middle path and ensure enough crude oil supply. We don't give full credit to what the Indian government did in those three years. Our diplomacy, the Petroleum Ministry, and the efforts of the Prime Minister and the External Affairs Minister ensured that India's energy supply wasn't affected," said Anantha Nageswaran.
"On the economic front, India is trying to use the current development on trade to reduce import duties so our domestic manufacturing cost goes down...," he added.
The CEA said the unfolding situation between Israel and Iran is worrying for India. "In the last week, crude oil prices have risen to about $73-74 per barrel... This raises essential risks for India." One may recall that in 2022, when the Russia-Ukraine war erupted, price of crude oil crossed $100 per barrel, yet India managed to sustain a 7% GDP growth rate. He added, "A lot depends on how much the crude oil prices rise further and how long that period lasts..."
On tariffs, the CEA was far more measured, saying the one need not conclude that they will be necessarily detrimental to India. "Ultimately, it also matters what tariff rates India's competing countries get. It is premature to say that tariffs will make our exports difficult for now..."
In his assessment, the production-linked incentive schemes has served India well, improving self-reiance in several sectors. "From nothing to today, we are exporting between $10-15 billion worth of mobile phones. We have created domestic capacity in many product areas regarding renewable energy... This scheme focused minds on what we need to have a forceful manufacturing process in the world."
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