Year of the Economy

Europe witnessed an unprecedented rise of right-wing parties in the French and German elections as well as elections to the European Parliament in June. French President Emmanuel Macron was forced to call snap elections to stem the right-wing tide, for which he had to bear a steep political cost. Ever since, the country has remained unstable politically. In the UK, the Conservative Party suffered a historic defeat in the elections held in July, bringing the Labour Party back to power after 14 years. In Japan, too, the Liberal Democratic Party, which has ruled the country since 1955, suffered major losses in the elections in October, failing to secure a parliamentary majority even with its junior coalition partner Komeito. An unstable coalition is in power led by Prime Minister Shigeru Ishiba.

The battle royal of 2024 was in the US, where Donald Trump brought the Republican Party back to power after four years with a massive popular mandate. Proving poll predictions wrong, Trump defeated his Democratic Party rival Kamala Harris by a convincing margin, not only winning a popular majority for his presidency but also a majority in both houses of Congress for Republicans.

In India, the BJP led by incumbent Prime Minister Narendra Modi lost the parliamentary majority in the elections held in June but managed to form the government for a third consecutive term with the help of its allies. In neighbouring Sri Lanka, in the elections held in September, traditional parties were replaced bringing to power the revolutionary new party, National People’s Power.

Overall, the super year of elections ended with instability writ large in many countries in Europe and elsewhere. The return of President Trump in the US is being viewed by many as another destabilising factor in world politics.

In India, PM Modi quickly regained political initiative — ceded to the Opposition parties during parliamentary elections — through two successive big victories in Haryana and Maharashtra. Yet, democratic dysfunction is plaguing the country’s politics with the Opposition, having gained some numerical strength in the Parliament, hell-bent on obstructing the legislative process on flimsy grounds.

As 2025 dawns, this certainly does not bode well for the country. Five years ago, after winning the 2019 parliamentary elections, Modi promised to take the country’s economy to $5 trillion. Although the Covid pandemic caused a major disruption in the world’s growth trajectory, leaving major economies like the US and China struggling, the Modi government managed to quickly bring the Indian economy back on track by registering impressive annual growth rates of above seven per cent. The World Bank has revised India’s GDP growth forecast to seven per cent for the fiscal year 2025, up from its previous projection of 6.6 per cent. According to the Bank, India will remain the fastest-growing major economy in the world, outpacing China, which claims to have registered a growth rate of 4.7 per cent. With the debt-to-GDP ratio declining from 83.9 per cent to 82 per cent, and the current account deficit hovering around a low 1 to 1.5 per cent of GDP for the next couple of years, the World Bank sees India’s economy to be a bright spot in an otherwise damp global economic outlook. This might soon push India to become the third-largest economy in the world, crossing the $5 trillion mark by 2027 in all probability.

In the new year, and a few years to come, India’s singular obsession should be upscaling its economy. While public spending is sufficiently high under Modi, leading to healthy GDP growth rates, challenges like unemployment and stagnant exports ring alarm bells. Private and corporate participation in the economy is below encouraging levels — this needs immediate remedial measures. The PM is giving clear indications that a healthy socio-political environment is key to enhanced private capital inflow and strong economic growth. By attending the year-end Christmas Mass in Delhi and by offering a chadar to the Ajmer Sharif Dargah at the beginning of the new year, he sought to underscore the importance of social and religious harmony for economic revival and progress. Some other Sangh Parivar leaders too have hinted at the same.

The country needs to pick up the signals not only from the leadership but also from global experience that political stability and social harmony are of utmost importance to achieve economic goals. China registered almost 10 per cent GDP growth for 30 successive years between 1980 and 2010. Singapore, too, demonstrated a similar growth trajectory during those three decades. Unfortunately, India never maintained such consistency in economic growth. Barring two exceptions, it has never even touched nine per cent growth since Independence.

Shouldn’t we declare the economy as our national resolve for the new year, and keep all other domestic disputes on hold for some time?