Global disruptions are becoming more commonplace, posing challenges for economies worldwide. Neelkanth Mishra, the chief economist at Axis Bank, has advised countries like India to brace for geopolitical shocks occurring every one to two years as global tensions increasingly shape the economic environment.
During a discussion at Kotak Private Banking’s Take and Counter Take forum, Mishra emphasized that recent de-escalations, including the temporary truce in West Asia, should not be perceived as lasting peace but rather provide a brief window for nations to prepare for an uncertain future.
Mishra highlighted that ongoing tensions are part of a broader global realignment, notably the escalating rivalry between the United States and China. He described this as a significant structural shift in global power dynamics that could lead to recurrent disruptions.
Previously, global integration fostered cooperation and reduced conflicts, but the current trend is veering towards protectionism and cautiousness among nations, heightening geopolitical risks that are expected to persist for an extended period.
One critical repercussion of such disruptions is the vulnerability of global supply chains. Mishra pointed out that even minor disturbances in energy or logistics could reverberate across various industries, potentially impacting sectors like manufacturing, aviation, tourism, chemicals, and fertilizers. These disruptions can escalate costs, affecting both businesses and consumers.
Despite the challenges, Mishra expressed confidence in India’s improved resilience to tackle such adversities compared to the past, attributing it to enhanced macroeconomic stability, robust capital markets, and better policy frameworks. While acknowledging the progress, Mishra cautioned that additional measures are necessary to mitigate risks effectively.
A key concern for India remains its heavy reliance on imported oil and gas, especially during global conflicts that can spike energy prices, adversely affecting the economy. Mishra suggested transitioning towards electrification and reducing fossil fuel dependency to bolster energy security and minimize the impact of global price fluctuations.
Emphasizing the importance of utilizing uncertain periods for reforms, Mishra underscored that proactive decision-making during crises positions countries advantageously when conditions improve. Waiting for stability before implementing policy changes could hinder progress, urging governments to strengthen areas like infrastructure, housing, and domestic demand to lessen reliance on global trends.
Mishra also highlighted the need for reforms in India’s tourism and services sector, citing regulatory obstacles and capacity limitations that make India a relatively expensive tourist destination. Improving infrastructure, relaxing regulations, and enhancing services can attract more tourists, create employment opportunities, and stimulate economic growth.
In conclusion, Mishra urged countries to seize the current phase of eased tensions as an opportunity for timely actions, cautioning that delaying responses to disruptions could pose greater challenges in the future. The global economy is transitioning into a phase where disruptions may occur more frequently, necessitating preparedness through strengthening domestic systems, mitigating external risks, and driving reforms amidst uncertainty.
The article ends with the message that while India stands in a more resilient position than before, the upcoming years will test its ability to weather repeated shocks in an increasingly volatile global landscape.