It is tough to make predictions, especially about the future. Yogi Berra’s observation has stood the test of time. Last December, this column had defined 2023 as ’the year that failed forecasts’. Predictions for 2024 did not fare better. Unlike in ancient times, the future is not divined from the intestines of animals, but from the innards of data. But the prognostications are as random as they were in that era.
Across domains, forecasts were disconnected from reality. In December 2023, the Reserve Bank of India found growth resilient and robust, and estimated the GDP would increase at 7-plus percent. That was not to be. In the stock markets, forecasts for the Nifty50 ranged between 20,000 and a high of 25,000. The Nifty50 crossed 26,100 in September, but has slid to around 23,000. Unfazed punters are now predicting the Nifty50 at 28,000 by December 2025.
The experts on Wall Street did no better. In January 2024, the street expected benchmark index S&P500 to range between 4,200 and 5,400. The index closed at 6,086 on December 24—over 600 points above the highest estimate. Never mind the blushes. This December, Wall Street is predicting a range between 4,600 and 7,400, and Apple is expected to be the first company to achieve a market value of $4 trillion.
In 2024, a year of elections, predictions on election outcomes didn’t pass muster either. In the world’s largest democracy, the BJP stopped well short of predicted targets and in the world’s oldest democracy, despite the “too close to call” theories of pollsters, Donald J Trump decimated Kamala Harris and achieved the trifecta winning the presidency and the two Houses of Congress.
Trump’s victory has upended formulaic two-by-two charting and SWOT analysis of the future. Stock markets are yo-yoing—foreign investors have dumped Indian stocks worth over Rs 1 trillion. Currencies are tumbling—the rupee has crossed 85.58 to the dollar and the yen is at 157 on speculation and fears.
His utterances, choice of cabinet and ruling by social media posts approach renders 2025 a year that defies predictions. Mark Twain famously said history doesn’t repeat, but it does rhyme. But open-ended question is: rhyme with which era, which crises? The spectrum of global issues—geo-economics, geopolitics, climate alliances—all are predicated on the ideological zeal and whims of one man.
The chaos is vivid across the advanced nations. There is the economic aspect and then there is the geopolitical aspect. Trump has threatened to reclaim the Panama Canal, suggested invasion of Mexico to attack cartels, wants to buy out Greenland and called Canada the 51st state of the US.
Meanwhile, the World Bank has advised China to undertake deeper reforms as its economy continues to be in a major slump and is dumping goods at will across global markets. As for the alternative markets, the two largest economies of Europe—Germany and France—are teetering on the edge of political and economic crises.
It promises to get worse. Trump has assured his MAGA base that he will address immigration, ramp up tariffs and cut taxes in that sequence as he takes over on January 20—add the Elon Musk-Vivek Ramaswamy-led DOGE initiative. The immigration issue has widened from deportation of illegals to include H1-B visas. How this plays out will impact India’s IT services—currently the largest exports and private formal employers.
His threat to impose tariffs—on China, Canada and Mexico—will disrupt supply chains, pricing and inflation. There is a notion that India is immune to the tariff threats. Fact is, just last week, Trump threatened reciprocal tariffs on India, stating, “If they tax us, we tax them the same amount.” This matters, as India’s exports to the US now tote up to over $77 billion and American investors are owners of Indian shares.
Trump has also promised to extend the benefits of the Tax Cuts and Jobs Act—and dangled a host of other cuts including on tips and senior citizens. The corporate tax cuts will trigger a flight of capital, affect flows of portfolio and direct investments to emerging economies such as India—the US is already the top recipient of investments, with total private flows of $220 billion as of October 2024.
It has been argued that Trump’s threats are negotiating tactics. It is also true that Trump's promises seem incoherent give his choice of team. It is also manifest that the MAGA base is not a homogenous unit, as validated by 38 Republican members of Congress voting against Trump’s wishes last week. Even on H1B visa, there is a rift between the anti-immigration MAGA right and the DOGE faction of MAGA advocating induction of skilled workers. Hope is not a strategy.
All said and done, the encounters underline that there will be dramatic episodes. Uncertainty is the new certainty.
The unpredictability caused by Trump matters. India is at an inflection point. The slide in GDP growth to 5.4 percent is grave, especially in the face of Trumponomics. Given its demography, 7 percent GDP growth should be the floor, not the ceiling. India’s transformation has been propelled by crises. The list of unattended structural reforms is long.
The challenge of Trumponomics should be a wakeup call for the central and state governments. For years, India’s political class has built a strong consensus on weak reforms. This consensus must be dismantled if we aspire for a Viksit Bharat.