2025 and Beyond: How Geopolitics, Energy, and AI Will Shape Our World

1. Geopolitical Considerations: Political instability - but wars will abate

Surprise abound – Germany, Korea, and Canada are undergoing unexpected regime change/turmoil.

The Middle East would also continue to surprise ( I mean with Peace!) with Assad gone in Syria and Palestine, tension is expected to subside.

Ukraine – Russia war looks set to prolong with intermittent increase in action.

The current U.S. political climate is potentially polarized, and there are political realignments in traditionally stable countries like Germany and Canada. Additionally, conflicts in regions such as the Middle East and Russia may disrupt global supply chains and trade flows. To protect its economy from external turbulence, India must continue diversifying its export markets, building strategic reserves, and fostering regional alliances.

2. Oil Prices and the Evolving Energy Mix: Plateau is around $70 and possibly trend down

Consumption is plateauing – mature economies are not consuming more – renewables are now material and growing.

According to the International Energy Agency (IEA), global oil demand surpassed 100 million barrels per day in 2023 and may inch up to around 102 million barrels per day in 2024

On the renewables front, IEA data indicates that global additions to renewable capacity soared nearly 30% in 2023 to about 340 GW, primarily driven by solar and wind. In India, installed renewable capacity reached approximately 175 GW in 2023, and the country aims to hit 500 GW by 2030. Rapid solar expansion, declining technology costs, and supportive policy frameworks are gradually lowering India’s reliance on imported fossil fuels and stabilizing its long-term energy outlook.

3. Interest Rates and Inflation: Steady

The Reserve Bank of India will likely maintain a neutral-to-accommodative stance as inflation moderates within target ranges. Stable or slightly softer interest rates will support business investment and consumer credit, which is essential for sustaining economic momentum.

4. India’s GDP Growth: The Q2 FY24 slowdown is NOT a blip  and appears more systemic and broad-based

I would peg India’s GDP to grow around 6 to 6.5% in the coming year, supported mainly by government-led infrastructure spending, a steady rise in domestic consumption, and policy continuity. Private Capex is still missing; hence, projections beyond 2025 will also be muted. Global trade uncertainties may still pose headwinds, limiting potential upside.

5. Corporate Earnings and Equity Markets: Modest growth and maybe select sectors will shine

Domestic corporate earnings are expected to improve modestly, aided by robust consumer demand and ongoing structural reforms. While occasionally buffeted by external shocks, equity markets should remain broadly steady. Sectors like financial services, technology, and consumer durables will likely lead to incremental gains.

6. SME Sector: Outperform

The SME sector will benefit from the above since it has constantly invested in Capex and Capacity ( read our industry research published on the CFO Bridge LinkedIn page). Its main pain point of access to Equity and working capital-related issues is being addressed. Hence, it will outshine.

7. AI Penetration: Rapid and surprise

AI adoption will continue to grow, and by the end of the year, everyone holding a smartphone will be using AI daily. We will become a more intelligent society; hence, its societal impacts and other aspects are unpredictable now. But 2026 and beyond will undergo tremendous societal changes due to AI.