The National Council of Applied Economic Research (NCAER), one of India’s premier economic policy research think tanks, carried out the 131th Round of its Business Expectations Survey (BES) in December 2024, with support from the National Stock Exchange of India Limited (NSE). NCAER has been carrying out the BES every quarter since 1992, covering 496 firms across four regions.
The historical resonance of 2025 cannot be overstated. It marks the halfway point to achieving the United Nations’ Sustainable Development Goals, reflecting progress and challenges in poverty alleviation, gender equality and climate action. It is an especially pivotal year in advancing regional commitments, such as the Addis Ababa Action Agenda on Financing for Development, which will also evaluate progress in mobilising resources.
Amid these global shifts, India stands at a critical juncture. The world’s most populous democracy faces a turbulent landscape of geopolitical rivalries, technological shifts and the urgency of climate action. The question remains: will global economic forces propel India toward leadership or will they impede its ascent?
Since the Middle Ages, India’s economic journey has been shaped by its participation in global trade and financial shifts. After a period of insulation, the 1990s marked its gradual reintegration into the global economy. Yet today, the stakes are higher than ever. With a slowing global economy and unpredictable global financial conditions, India must navigate external headwinds while fostering domestic resilience.
Geoeconomic recalibration
The world’s economic order is increasingly fragmented, driven by rivalries shaping trade, technology and financial flows. This disruption creates both risks and opportunities for India. The country’s recent push to settle trade in rupees instead of dollars indicates an ambition to assert greater economic sovereignty. However, limited international adoption of the rupee and complex relationship management across competing blocs emphasise the challenges of asserting such sovereignty in a fragmented world.
The global economy is beginning to reflect the effects of shifting demographics, including ageing populations, uneven consumption patterns across sectors and regional variations in savings behaviour. Some areas are seeing elevated savings post-pandemic while others are experiencing declines. Additionally, advanced economies are projected to grow at a modest 1.4% in 2025, while India’s economy is expected to expand by at least 6.3% – outperforming advanced and emerging markets. However, slower growth in advanced economies could dampen demand for Indian exports, particularly in IT and manufacturing sectors.
The challenge lies in sustaining domestic reform momentum while recalibrating India’s global strategy. Domestic self-sufficiency and external engagement must work together to ensure India’s resilience against global uncertainties over the coming decades.
The debt-climate-development nexus
Compounding these challenges is the issue of debt. At $307tn, global debt has reached unprecedented levels, heightening vulnerabilities. For many economies, supply-side bottlenecks and climate-related shocks exacerbate fiscal pressures, reducing their capacity to fund development and climate adaptation. India’s debt-to-gross domestic product ratio – at approximately 83% – is lower than that of many advanced economies but remains elevated compared to pre-pandemic levels. Fiscal prudence will therefore be critical to ensuring sustainable growth. Effectively absorbing budgetary resources as well as leveraging external financing for infrastructure and renewable energy projects will be key to addressing long-term development needs.
Moreover, emerging markets faced nearly $1tn in capital outflows over the past year, exposing the fragility of global investment flows. While India’s macroeconomic fundamentals have provided some insulation, managing the volatility of international capital markets remains a challenge. Foreign exchange reserves, though substantial, may fall short of the scale and flexibility required to meet India’s funding needs in a highly competitive global environment.
Advancing climate resiliency
The climate crisis presents both a challenge and an opportunity for India. As one of the most climate-vulnerable nations, India faces the dual task of mitigating risks and leading green energy transitions. Initiatives like the International Solar Alliance highlight India’s commitment to shaping the global green agenda.
However, climate finance remains a critical bottleneck. COP30 will test India’s ability to advocate for equitable finance mechanisms while balancing domestic fiscal priorities. India must align its climate resilience efforts with broader domestic development goals to lead on climate action effectively.
The digital revolution
There is, however, an avenue for India to assert global leadership and that is in the frontier of space technology, artificial intelligence and digital finance. The Unified Payments Interface, a homegrown digital payments system, has revolutionised financial inclusion, particularly in rural areas, and inspired adoption by other countries. This positions India as a global innovator in digital finance.
India must leverage its digital revolution to achieve economic objectives, create high-quality jobs and boost productivity to build on this momentum. However, this transformation carries risks, including cybersecurity threats, consumer protection concerns and regulatory complexities. Robust institutions, effective governance and resilient capital markets are essential to cement India’s leadership in digital finance and redefine its future.
What 2025 holds
2025 will be a litmus test for India’s ability to align immediate policy actions with its long-term vision of becoming a developed, equitable and sustainable nation by 2047 – its centenary as an independent republic. Achieving this vision requires clear, measurable milestones and, most importantly, broad social and political consensus.
India’s transformative reforms in labour markets, climate policy or digital governance must address public skepticism and ensure fairness, inclusivity and trust in institutions. Without this foundation, resistance to change could undermine progress.
Beyond its domestic goals, 2025 will be pivotal for India’s leadership in advancing the global South’s priorities and shaping Brics’ economic agenda. Addressing regional inequalities, managing inflation and unemployment, and laying the groundwork for sustainable growth will demonstrate India’s capacity to deliver on its promise of inclusive development.
India thus stands at a critical moment in its modern economic history. Its choices in 2025 will determine its trajectory toward 2047 and its influence on the global economic landscape. India’s rise as a global power is not preordained – it is a deliberate outcome of action, adaptability and durable implementation. As Indian philosopher and reformer, Swami Vivekananda, urged, ‘Arise, awake, and stop not until the goal is reached.’
Udaibir Das is a visiting professor at the National Council of Applied Economic Research, senior non-resident adviser at the Bank of England, senior adviser of the International Forum for Sovereign Wealth Funds, and distinguished fellow at the Observer Research Foundation America. He was previously at the Bank for International Settlements and the International Monetary Fund.
In this paper, we examine the dynamics between inflation uncertainty, beliefs and inflation expectations of firms. Inflation uncertainty and beliefs influence a firm’s perception of the inflation levels, thereby impacting its expected inflation. Using novel survey data on firm inflation expectations, we examine the extent to which crises influence the relationship between inflation uncertainty and inflation expectations. We find that the effect of crisis-led inflation uncertainty on inflation expectation is asymmetric. The COVID-19 pandemic increased the impact of high inflation uncertainty on inflation expectations. On the other hand, the Russia-Ukraine war reduced inflation expectations. The war effect may be attributed to geopolitical factors that helped India procure crude oil from Russia on favourable terms. Additionally, we find that the disagreement in expected inflation across firms seems to have increased in the period post-pandemic. Further, this paper analyses whether firms’ beliefs about their own performance influence inflation expectations. Performance can impact the perception of cost structure, thereby, inflation expectations. The findings suggest that firms’ beliefs about their performance are negatively associated with inflation expectations.
In this paper, we investigate the macroeconomic and labour market implications of gender equality in unpaid care work and the formalisation of part-time employment in India. The unequal distribution of unpaid care responsibilities significantly limits women’s labour force participation, perpetuating gender disparities in employment and economic outcomes. Using the McCall-Mortensen macroeconomic job search framework, this paper models the potential impacts of policy interventions on female labour force participation rates (LFPR). A key contribution of the paper is to derive quantitative estimates via model simulation. We find that formalising part- time employment contracts and equalising the time burden of unpaid care work between genders predict a 6-percentage point increase in female LFPR, raising the current rate from 37% to 43%. The findings underscore the critical need for formalising part-time employment contracts in India. Equalizing the burden of unpaid care would require raising public investment in childcare and eldercare infrastructure, and policies promoting paid parental leave and tax incentives for shared care. Drawing on best practices from the advanced world, the study emphasises the role of flexibility in enabling women to balance professional and domestic responsibilities.
Why India’s job crunch is on a longer spell By comparing data from two periods from the NSSO’s Periodic Labour Force Survey (PLFS), 2020-21 and 2023-24, the shifting unemployment patterns can be better understood. These changes provide us with a clearer picture of labour force participation, economic recovery, and the specific obstacles different demographic groups encounter
Unemployment is a multifaceted challenge that affects individuals across various demographic groups, including gender, age, and the length of their job search. A comprehensive understanding of unemployment spells – the period during which individuals remain unemployed while actively seeking employment – is vital for effective policymaking, economic analysis, and workforce planning. This can be attained by analysing the percentage of the population within distinct timeframes, based on how long individuals have been unemployed. By comparing data from two periods from the NSSO’s Periodic Labour Force Survey (PLFS), 2020-21 and 2023-24, the shifting unemployment patterns can be better understood. These changes provide us with a clearer picture of labour force participation, economic recovery, and the specific obstacles different demographic groups encounter.
A key finding among males is the notable rise in long-term unemployment. In 2020-21, a significant portion of unemployed men (37.5%) were in the 6-12 months and 15.4% in the less than or equal to 6 months unemployment category. By 2023-24, this number decreased to 25.9% and 12.2%, suggesting that a significant share of previously short-term unemployed males is now experiencing longer job search durations. Specifically, the percentage of males in the 1-2-year unemployment category rose sharply from 23.9% to 30.9%. This shift indicates that many men are facing difficulty in securing jobs beyond the initial months of unemployment, and similar trends are visible in both the 2-3 year and over 3-year categories.
Shifts in the labour market – such as automation and changes in demand for certain industries – have likely resulted in longer job search times for men. Additionally, the post-COVID restructuring of industries has altered the types of skills employer seek, leaving a segment of the male workforce either underemployed or struggling to adapt to new sectors.
While females still experience shorter unemployment spells than their male counterparts in the 6-12 month and the less than or equal to 6 months unemployment category, the 2023-24 data reveals a clear trend toward longer job searches. In 2020-21, 35.4% of unemployed women had been seeking work for 6-12 months. By 2023-24, this figure dropped to 21%. However, the percentage of women unemployed for more than two years increased substantially, from 10.7% in 2020-21 to 16.3% in 2023-24. The rise in long-term unemployment among women can be attributed to several factors. During the pandemic, many women, particularly those in caregiving roles, were disproportionately affected by job losses, leading to longer unemployment spells. Additionally, gendered labour market segregation – where women are often concentrated in sectors like retail, hospitality, and education – may contribute to extended job search times, especially since these sectors were hit hardest by the pandemic.
Among younger individuals (15-29 years), the data reveals a concerning trend. While the proportion of youth unemployed for less than or equal to 6 months decreased between 2020-21 and 2023-24 (from 14.7% to 11.8%), there was a significant increase in the length of unemployment lasting more than one year. Specifically, the percentage of young people unemployed for 1-2 years increased from 23.% to 32.1%. A similar upward shift is observed in both the 2-3 years and over 3 years categories.
This shift reflects the growing challenges faced by young job seekers in an increasingly competitive and complex job market. The youth labour market is heavily influenced by factors such as educational attainment, skill gaps, and the availability of entry-level positions. The rise in long-term unemployment among young people can be attributed to several key factors: slower recovery of the job market post-pandemic, mismatched skills and job requirements, and heightened competition for limited opportunities. Moreover, technological advancements like automation and digitalisation have exacerbated the issue.
Evolving industry demands
For middle-aged individuals in the 30-45 age group, the data reveals significant changes in short-term and long-term unemployment patterns. In 2020-21, this group had the highest proportion of individuals unemployed for 1-2 years (25.4%), and 23.2% were unemployed for 2-3 years. By 2023-24, long-term unemployment became even more pronounced, with 41.4% now unemployed for more than 3 years. This shift is driven by the transformation of industries and the growing demand for advanced, technology-driven skills. Middle-aged workers, while experienced, often find their qualifications outdated. Family responsibilities may also limit their ability to pursue retraining or relocate, compounding their challenges.
Older workers encounter significant barriers to re-entering the workforce. While the percentage of individuals (aged 46-60) unemployed for less than 6 months decreased from 20.1% in 2020-21 to 17.3% in 2023-24, long-term unemployment in both the 1-2 year and 2-3 year categories remained significant. Older workers face unique challenges when re-entering the workforce, including age discrimination, declining industry relevance, and a lack of modern digital skills, all of which make it more difficult to secure employment. For individuals aged 60 and above, the situation is even more challenging and severe. The percentage of this group unemployed for over 3 years increased sharply from 22.6% in 2020-21 to 47% in 2023-24.
The data from 2020-21 and 2023-24 reveal a complex and evolving unemployment landscape, with significant shifts across gender, age, and the duration of unemployment. Long-term unemployment is rising across all demographic groups, highlighting the need for policies that support skill development, reduce labour market barriers, and create greater employment opportunities for workers at all stages of their careers. There is another factor that needs to be accounted for, where some sections of the employable youth are looking forward to maintaining life-work balance rather than going all out to grab and slog for whatever employment opportunities are available. This phenomenon will potentially leave such youth unemployed for longer periods.
As economies continue to recover and adapt to new technological realities, it is essential to provide targeted support for the most vulnerable groups in the labour market, including youth, women, middle-aged workers, and older workers. By focusing on reskilling, enhancing job market accessibility, and addressing specific demographic challenges, policymakers can help foster a more inclusive, resilient, and sustainable labour market for all.
Palash is fellow at National Council of Applied Economic Research, New Delhi; Wankhar is a retired Government of India officer) Disclaimer: The views expressed above are the author’s own. They do not necessarily reflect the views of DH.