Global conflicts, trade restrictions continue to pose growth risks
At the same time, the ongoing conflicts impacted energy and food security, leading to higher prices and rising inflation.
The Economic Survey 2024-25 released on Friday warned that increased geopolitical and trade uncertainties and risks linked to ongoing conflicts in Ukraine and West Asia can hit economic growth, inflation, financial markets and supply chains.

The warning came against the backdrop of growing concerns about the imposition of tariffs and other punitive trade measures by the Donald Trump administration in the US, tensions between China and the US, and the continuing fallout of the Russia-Ukraine conflict and the fighting between Israel and Hamas in West Asia.
While referring to Trump’s return to the presidency in the US less than two weeks ago, the document said: “The world has had an early inkling of policy changes that will affect the global movement of goods and labour.”
The survey described 2024 as an “eventful year” that witnessed unprecedented electoral activity that saw more than half the global population voting in elections, even as the Russia-Ukraine and the Israel-Hamas conflicts increased regional instability.
Without directly referring to the Trump administration in the US, the survey said geopolitical tensions had reshaped global trade. “Geopolitical risks and policy uncertainty, especially around trade policies, have also contributed to increased volatility in global financial markets,” it said.
At the same time, the ongoing conflicts impacted energy and food security, leading to higher prices and rising inflation. Cyberattacks became more frequent and severe, with “growing human and financial consequences due to the increasing digitisation of critical infrastructure”. The survey described the elevated geopolitical and trade uncertainties as “headwinds to growth”.
The conflicts pose “significant risks” to global economic outlook, and an intensification of the conflicts in West Asia and Ukraine can “lead to market repricing of sovereign risk in the affected regions and disrupt global energy markets”. While the oil market is well supplied now, any damage to energy infrastructure can tighten supply, adding uncertainty to the economic outlook.
The tensions in West Asia also disrupted trade through the Suez Canal, which accounts for 15% of global maritime trade volume, and diversion of ships around the Cape of Good Hope has increased delivery times by 10 days or more. These disruptions led to higher freight rates, pushed goods prices up, hit global trade activity, and pressured global supply chains.
While container freight rates normalised in 2023, they showed a significant surge in 2024 due to shipping route disruptions in the Red Sea and delays at the Panama Canal, and this in turn sustained inflationary pressures.
The survey noted that the Geopolitical Economic Policy Uncertainty Index remains elevated because of concerns about economic policies, while the World Trade Uncertainty Index has risen because of trade tensions and policy shifts in major economies.
“Trade policy uncertainty has increased sharply in recent months, though it has not yet reached the levels seen in 2018-19. The stock of import-restrictive measures within G20 economies continues to grow, now affecting 12.7% of G20 imports—more than three times the coverage of such measures in 2015,” the survey said.
“If uncertainty persists and trade-restrictive measures continue to rise, they could increase costs and prices, deter investment, hinder innovation, and ultimately reduce global economic growth.”
Global policy changes can also influence India’s external trade. Again, without naming the Trump administration, the survey said: “The evolving trade stance of a few major economies could affect key Indian export sectors such as chemicals, machinery, textiles, and electronics. In the short term, diversifying export markets is essential, while medium-term efforts should focus on increasing market share.”
The survey also highlighted political and economic uncertainties in Europe, where the continent’s biggest economic engine, Germany, experienced both economic contraction for two successive years and political uncertainty as elections are due in February. France, too, had political uncertainty due to developments in the wake of the snap elections there, while the UK is witnessing fiscal pressures and a slowing economy.
“In general, Europe is facing competitiveness pressures amidst much higher energy costs caused, in part, by the transition towards renewable energy. To a large extent, these developments have affected the global economy,” it said.
In the long-term, India “must position itself as a strategic partner in high-value sectors” such as biotechnology and semiconductors. Strategic technology partnerships will provide opportunities for enhanced cooperation in key sectors such as space, semiconductors, quantum technologies and advanced telecommunications, it said.
The survey recommended that India should go all out to attract and facilitate domestic and foreign investments needed to become a competitive and innovative economy. “It will not be easy because competition for investment is not only with other emerging economies but advanced economies, too, who are determined to keep their businesses at home. Equally, investing in and strengthening domestic supply-chain capability and resilience will be the hallmarks of strategic and long-term thinking on the part of the private sector,” it said.
