The Economic Survey 2024-25 continues to set the tone of the upcoming Union Budget 2025-26. The survey has laid out India’s economic outlook as stable with FY26 real GDP growth estimated to grow between 6.3%-6.8%. However, the survey highlights some key challenges, including stock market risks and AI disruptions that require urgent policy attention.
Stock market risks in 2025
High valuations in global and Indian stock markets raise concerns about potential corrections. The benchmark equity index BSE Sensex declined 0.82%, or 638 points, to 77,500 in January 2025, driven by heavy selling by foreign institutional investors.
“Elevated valuations and optimistic market sentiments in the US raise the likelihood of a meaningful market correction in 2025. Should such a correction occur, it could have a cascading effect on India, especially given the increased participation of young, relatively new retail investors,” Economic Survey said.
Ultra-processed foods & health concerns
Rising consumption of ultra-processed foods in India is fuelling obesity, diabetes, and cardiovascular diseases. Policy interventions, such as front-of-pack labelling and awareness campaigns, are crucial to mitigating the long-term economic and social consequences.
“A multi-pronged approach would be required to address the concerns emerging from the increased inclusion of UPFs in diets in India. The Food Safety and Standards Authority of India (FSSAI) could consider bringing UPFs under regulation with a clear definition and standards, including stricter labelling requirements,” Economic Survey said. AI and jobs
Automation and AI are reshaping industries, leading to job losses, particularly in low-skilled and repetitive roles. “Among white-collar workers, an IIM Ahmedabad Survey highlights how 68 per cent of the surveyed employees expect their jobs to be partially or fully automated by AI within the next five years19. Forty per cent of the employees believe AI will make their skills redundant,” Survey said. AI risks in banking
Banks are increasingly relying on AI for credit assessment, fraud detection, and risk management. However, AI models may introduce biases, cybersecurity threats, and regulatory challenges. Economic Survey highlighted that along with the benefits, using AI in the banking system entails a few risks. The black-box nature of AI systems can make it difficult to assess the system’s reliability or contest its decisions. This lack of transparency can lead to trust concerns and challenges in validating the fairness and accuracy of AI decisions, making it challenging to audit or interpret the algorithms that drive the decisions.
“Accountability risks include difficulty in tracing decisions to their source and establishing liability. Other risks include those related to human resources, such as inadequate human oversight, over-reliance on AI, and loss of human expertise; cyber risks; malicious usages like synthetic identity frauds, rogue trading, and market manipulation; system-related risks such as inability to intervene and market correlations; and third-party dependencies and service provider concentration,” the Survey said. Efficacy of Insolvency Law
The Insolvency and Bankruptcy Code (IBC) has improved credit resolution but faces delays and inefficiencies. “The next step towards insolvency and bankruptcy reform is to improve operational efficiencies to speed up the resolution process. This is especially important for MSMEs, for whom legal costs can prove to be substantial,” Survey said.