
Davos 2024: Leaders watch global economy with a cautious optimism
Summary
The optimism is tempered by worries about geopolitics and its effect on global supply chains.For the over 800 global CEOs and business and government leaders gathered in Davos this year, Day 2 was fairly pleasant with the temperature at only minus 5 Celsius. There was cautious optimism about the state of the global economy. There was also a renewed enthusiasm among CEOS to use the World Economic Forum as a platform to discuss, debate and chart out actions and solutions to the world’s problems.
• The state of the global economy is on everyone’s mind. In 2023, global growth was quite resilient and inflation also toned down. Several countries such as the US and China did relatively well in the second half of 2023. India’s exceptional growth has of course been the highlight of the world economy in the past year. In 2024, people anticipate Europe to bounce back faster whereas the US might take more time to stabilize. Some leaders are predicting a soft landing on both sides of the Atlantic even as interest rates start coming down.
• The optimism is tempered by worries about geopolitics and its effect on global supply chains. Supply chains continue to be under stress but there is faith in the resilience of supply chains and emergence of alternate routes.
• In 2024, over 58 countries will see general elections including some of the world’s biggest economies, the US, the UK, and India. Every company is keenly looking at the elections outcomes and possible implications for geopolitics. In India, at least, the markets expect a vote of continuity .
• Artificial Intelligence – and its impact on entire business sectors and employment – is of course the hot topic. The technology leaders – from OpenAI, DeepMind, Microsoft and others – are the most sought out this year. AI’s impact on the environment was another hot topic – with Microsoft chief Satya Nadella talking candidly about the massive energy needs required to power the AI revolution and possible solutions to address the challenge.
• A few quarters believe that the world is not meeting its climate targets. There is a need to address the problem of costs through alternative technologies to accelerate the Net Zero commitments.
The India story continues to make a buzz at Davos.
• India’s favourable demographics, easing inflation, consumption potential, and services sector growth continue to attract global attention. Business leaders’ confidence in India is on the rise as many look to double down their investments and make India an integral part of their supply chain.
• Most of all, for this growth momentum to continue, leaders and investors want India to continue its reforms and make further improvement in ease of doing business. At the same time, they are acknowledging the exceptional resolve of the Modi government to continue this agenda as also the strong policy framework that is now in place and clarity on where India wants to go in crucial areas of AI, sustainability, etc.
• In the AI game, there is confidence in India’s emergence as an alternative destination for technological innovation and its opportunity to build its own semiconductors industry. It is about building on the great foundation of availability of IT talent and the digital infrastructure that already exists.
• Impetus to clean energy transition is unprecedented on the back of numerous measures by the government and the private businesses investing almost $3.5billion capital towards charting out their sustainability journeys. More importantly, this transition to clean energies will boost India’s manufacturing and export competitiveness.
Rajiv Memani, EY India chairman and regional managing partner, writes exclusively for Mint from Davos.