The festive season is in full swing. Shopping centers are decorated with dazzling decorations and the streets exude cheerfulness. Offices celebrate the camaraderie of Secret Santa, a wonderful tradition that fosters bonds between coworkers. I’m sure many of you may already be on vacation or winding your way through roads and airports, looking for the sunrise of a brand new year.
Amid this vibrant activity, we must take a moment to consider a crucial economic story: consumption.
Looking at the crowds and travel, many economists predict higher consumption… but that’s where my point lies. I think the consumption data is distorted and should not be fully trusted. Looking at the crowds in Goa, we cannot say that consumption is booming. The simple reason is that there are only a limited number of destinations that tourists can go to.
Real consumption trends are determined by multifaceted factors. After working 10 hours in the office and spending 4 hours in traffic 5 days a week, people look for comfort. Short journeys are therefore increasing. It is also driven by a “live in the moment” mentality, among other external factors. So I believe this story of increased activity should be viewed with nuance, not assumptions.
2024: A year of transition
This year was all about elections. In the new year we will see the impact of elections. Elections, even when won by an overwhelming majority, have their own impact. Look at Maharashtra: it has taken so long to divide the ministries, and yet discontent continues. I’ve been going through more than a dozen reports on the 2025 outlook over the past few days, and broadly speaking, there are a few themes I’ve come across. AI is at the top of the list, geopolitical tensions will persist and markets will remain volatile. For India, foreign investors are expected to maintain their focus, but a lot depends on the upcoming budget. With foreign direct investment down 60%, policy direction will be critical.
Finances in 2025
The financial sector will see an emphasis on collaboration as FinTechs consolidate amid tighter compliance and financing restrictions. I see a lot of action in NBFCs, with foreign investors seeing opportunities and many local players looking to exit.
Banks will face continued pressure on deposits, although private lending is likely to perform well. Business investment, which will mainly focus on greenfield projects, is expected to pick up in the second half of the year. While there is a good chance that the new RBI governor will cut interest rates, inflationary pressures will remain.
Be careful for 2025
Be prepared for a more cautious approach as inflation is expected to be higher at least in the first half of the year. At the same time, the devaluation of the rupee will also worsen inflation as products with imported components would become expensive.
Global tensions persist, with fears of conflict and the return of Trump-era policies casting long shadows. In short, the first half of the new year is likely to witness higher inflation, exacerbated by the depreciation of the rupee, making imports costlier.
After rapid digitalization in recent years, our focus next year will be on AI.
From the beaches of Puri to the pilgrimage site of Badrinath, QR scan codes are visible everywhere.
I often wonder how life changes; barcodes and QR scan codes have become an integral part of our routine. With the use of mobile apps, digital seems to become an extension of our lives. But even though we have all these facilities, there is still a lot missing. India is far from being on the list of happiest countries. I don’t even compare with Denmark, which uses the Hygge concept: a feeling of coziness, contentment and well-being, to be happy.
Let there be quality
Something is specifically missing from the middle class, which is the backbone of the economy.
A young professional, already burdened by student loans, today faces grueling work hours, exorbitant urban rents and chaotic traffic. When I look at the men and women, decked out in professional attire, queuing for hours in front of the car, I feel sorry for them. While we flaunt the consumption story, let’s not forget that half of it is financed by banks. The working class has no reprieve from suffering. Remember, this year we lost a young CA Anna Sebastian who had a bright future.
We supposedly live in a digital world, but we face problems of higher pollution and congested roads. Unfortunately, no matter how much you pay, there isn’t much quality of life.
The pursuit of quality
A French entrepreneur I met recently said that while his peers are eager to embrace markets like Singapore or Hong Kong, India often fails to inspire the same confidence. It is a telling reflection on the urgent need to raise our living standards.
As we say goodbye to 2024, let’s focus on the moments that really mattered. What was your best moment? What are your goals for the coming year? Write back to me when it suits you.
May our paths cross and we meet soon. May you live in the best of times in 2025.
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(Editor’s note is a column written by Amol Dethe, editor, ETCFO. Click here to read more of his articles exploring various buzzing topics)
