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Updated 15:11 IST, January 31st 2025

Economic Survey 2025: Can India Tame The Elephant And The Dragon In The Room?

Before Budget 2024, Finance Minister Nirmala Sitharaman presented the Economic Survey 2024-25, highlighting a major global economic shift.

Reported by: Business Desk
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Economic Survey 2025
Economic Survey 2025 | Image: Republic

Ahead of the Union Budget 2024, the Finance Minister tabled the Economic Survey 2024-25, highlighting major economic trends shaping India's future. One of the most crucial themes discussed was geoeconomic fragmentation (GEF)—the global realignment of trade, investment, and technology due to increasing geopolitical tensions.

A significant aspect of this shift is China’s growing dominance in global manufacturing and strategic industries. As new trade restrictions and investment barriers reshape global commerce, India finds itself in a complex position—balancing economic independence with the realities of global power politics.

The Global Trade Shift: Breaking Down the Numbers
1. Trade Barriers and Investment Restrictions Are Rising
From 2020 to 2024, over 24,000 new trade and investment restrictions were introduced globally. These restrictions have slowed global trade growth and raised concerns about long-term economic stagnation.

Friend-shoring & Re-shoring
Major economies like the United States, EU, and Japan are shifting investments away from countries with geopolitical risks.

FDI Relocation Impact
Emerging markets, including India, face increasing challenges in attracting global capital.

2. China’s Manufacturing Dominance: The Dragon’s Grip
China continues to dominate critical industries, including:

Electronics and Semiconductors: Over 70% of global semiconductor manufacturing is concentrated in China and Taiwan.
Renewable Energy Components: China controls over 80% of solar panel production and battery manufacturing.
Rare Earth Elements: China refines 90% of the world’s rare earth materials, essential for high-tech industries.

With global economies reducing dependence on China, India has an opportunity to position itself as an alternative manufacturing hub.

What This Means for India
1. Energy Transition and China’s Role
India’s ambitious green energy goals—such as achieving 500 GW of renewable energy capacity by 2030—rely heavily on Chinese-manufactured components. While India has increased solar panel production, the supply chain remains vulnerable.

2. Strengthening Domestic Industrial Growth
The Economic Survey emphasizes the need for India to become self-reliant in manufacturing.

Key government initiatives include:

Production-Linked Incentive (PLI) schemes for electronics, semiconductors, and electric vehicles.
Relaxed labour laws and deregulation to make business operations smoother.
Investment in infrastructure to improve logistics and industrial growth.
India’s "Make in India" push and ease of doing business reforms can help attract global investments away from China

3. Trade Policies and Export-Led Growth
To compete globally, India must refine its trade policies and expand its export capabilities:

Reducing tariff barriers and simplifying trade agreements.
Boosting high-value manufacturing exports like electronics and pharmaceuticals.
Expanding free trade agreements (FTAs) with key partners like Europe, the US, and ASEAN nations

Challenges Ahead: Navigating a Complex Future
1. The Risk of Over-Regulation
While global trade tensions are increasing, India must avoid excessive protectionist policies that could deter investors. Policies should focus on:

Encouraging foreign investment without excessive restrictions.
Balancing regulatory oversight with business freedom.

2. India’s Workforce and Skill Development
To compete with China, India must:

Improve vocational training and education to meet industry demands.
Encourage automation and AI adoption in manufacturing.
Expand research and development (R&D) in high-tech industries

The Road Ahead for India’s Global Positioning
The Economic Survey 2024-25 highlights the fundamental shifts in global economic power. While China’s dominance in manufacturing and trade remains strong, India has a unique opportunity to attract global capital, strengthen its domestic industry, and expand its export markets.
 

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Published 14:19 IST, January 31st 2025