India’s digital journey has been remarkable, underpinned by its capability to deploy technology at a national scale
Strategically located in the Indo-Pacific, India stands as the world’s most populous nation and the seventh-largest by landmass. With a nearly USD 4 trillion GDP, India is the fifth-largest and fastest-growing major economy, maintaining a steady annual growth rate of approximately 6.5 per cent. As per Morgan Stanley, India is expected to contribute to nearly 20 per cent of global economic growth over the next decade. This trajectory is being driven by three significant forces: demography, digitalisation, and decarbonisation.
However, businesses in India must navigate a broad spectrum of risks, ranging from a shifting global geopolitical landscape and neighbourhood tensions to technological disruptions, socio-economic challenges, infrastructure deficits, environmental threats, health and safety concerns, and regulatory complexities.
This article delves into the risks and opportunities that businesses in India may encounter in 2025.
India’s Digital Transformation
India’s digital journey has been remarkable, underpinned by its capability to deploy technology at a national scale. Currently, there are 1.3 billion unique ID cards in circulation, with over 2.25 billion authentications every month. The country boasts a billion mobile phone users and over 95 per cent 5G coverage. The Unified Payments Interface (UPI), which records 16-17 billion transactions monthly, ranks among the largest digital payment systems globally. Similarly, FASTag, which links the country’s roadways, sees nearly 384 million transactions each month.
India’s regulatory environment remains steady. Its capital market is robust and active. In 2024, India topped the global IPO charts with 327 initial public offerings, raising more than USD 20 billion. India is also nurturing a dynamic start-up ecosystem, home to approximately 150,000 start-ups and nearly 1,800 Global Capability Centres (GCCs).
World In Transition
As a globalised and strategically significant economy, India is deeply influenced by international developments. The world is currently undergoing what some describe as a geopolitical recession. This phase is marked by active conflicts in Europe and the Middle East, with geopolitics overtaking geoeconomics. Rising protectionism is threatening the foundations of the international trading system, while nationalism, populism, and majoritarian sentiments continue to grow.
Global institutions, many of which were established in the post-1945 era, are increasingly seen as outdated and ineffective in reflecting present-day realities. The international order is evolving, with the world witnessing an “America First” approach, anxious allies, a weakened Russia, internal preoccupations within Europe, dynamic shifts in the Middle East, and growing US-China tensions.
The mutual suspicion between the US and China defines their bilateral relationship. Within the US, there is bipartisan agreement that China’s increasing power and assertiveness represent a strategic threat. The goal is to retain dominance in foundational technologies, military capability, currency strength, and international alliances. On the other hand, many in China view US actions as attempts to contain and undermine their rise and challenge the Chinese Communist Party’s authority. Issues like Tibet, Xinjiang, and Hong Kong are viewed by China as internal matters of national security, while Taiwan remains a sensitive red line.
Former President Trump has significantly reshaped geopolitical norms. His decisions—ranging from imposing tariffs on allies and suggesting the purchase of Greenland to withdrawing from the WHO and slashing development aid—illustrate a sharp departure from traditional diplomacy. His stance on Ukraine and Russia, contrasted with the Biden administration, has created uncertainties for both allies and rivals.
The Indo-Pacific region is fast becoming the epicentre of global activity. Asia’s re-emergence—from Japan’s post-war economic ascent and China’s rise to India’s increasing global role—represents a return to historic patterns.
Technological disruption is unfolding rapidly. In 2011, Marc Andreessen noted that “Software is eating the world.” By 2017, Nvidia CEO Jensen Huang remarked that “AI is going to eat software.” In 2024, artificial intelligence has progressed from hype to practical application. While AI promises improved efficiency and productivity, it also carries substantial risks. The US leads in AI investment and infrastructure, but developments like China’s DeepSeek model indicate narrowing gaps.
Cloud computing is transforming operations, and the confluence of mobile technology, cloud infrastructure, and AI is enabling novel business models. These shifts present both opportunities and new forms of risk. Cybersecurity is now a critical concern. Disinformation and misinformation travel faster than verified facts, and the World Economic Forum’s Global Risks Report 2025 identifies this as the most significant risk. Meanwhile, the cost of cybercrime, cyberterrorism, and cyber-warfare is forecast to hit USD 10.5 trillion in 2025 (source: Cybersecurity Ventures, CNN).
Climate change remains the most persistent long-term risk. While global climate summits continue to generate dialogue, concrete actions and firm commitments are limited.
Turbulent Neighbourhood
India is situated in a sensitive region, bordered by two nuclear-armed neighbours with whom it shares complex and often tense relationships. The fall of Sheikh Hasina’s government in Bangladesh, a traditional ally, has impacted bilateral ties, further strained by reports of attacks on minorities and religious sites.
To the west, Pakistan continues to grapple with deep economic instability and internal security concerns. The India-Pakistan relationship remains fraught, underpinned by historical grievances. In 2024, renewed terrorist activity and infiltration across the Jammu & Kashmir border led to heightened tensions after a period of relative calm since 2021.
India’s relationship with China is also nuanced and fraught with distrust, particularly following the 2020 Galwan clash. While talks and limited disengagement in Ladakh signal a desire to avoid escalation, a full normalisation appears unlikely in the near term. With China facing its own internal and external pressures, limited progress on rebuilding trust might emerge.
South Asia, with India at its core, remains demographically young and full of potential. Yet, it also embodies intense rivalries and structural vulnerabilities. Historically, external powers have influenced the region’s direction. China seeks deeper involvement, the US aims to counterbalance Chinese influence, and Russia strives to maintain relevance.
India Risk Outlook 2025
In 2024, elections around the world reflected a broader backlash against incumbents amid rising dissatisfaction with globalisation. In India, Prime Minister Modi secured a third term with a reduced majority. Nevertheless, subsequent victories in key state elections helped restore momentum.
Businesses operating in India in 2025 will continue to face a wide array of risks spanning geopolitical tensions, societal shifts, economic uncertainty, environmental threats, technological change, and regulatory challenges. The “India Risk Matrix 2025” from MitKat Advisory (cited below) outlines both the likelihood and impact of various threats facing the Indian business environment.
Natural disasters remain a tangible risk. India is vulnerable to earthquakes, floods, and cyclones. Seismic activity in the Himalayas poses a constant risk to Nepal and North/Northeast India. The country’s eastern coast is historically cyclone-prone, while western states like Gujarat, Maharashtra, Karnataka, and Kerala have also experienced cyclonic impacts in recent years.
India is undergoing one of the most significant internal migrations from rural to urban areas. Despite the growth of physical infrastructure, cities often struggle to accommodate this influx. Traffic congestion, inadequate housing, and overburdened public services are common.
Road safety continues to be a serious concern. India records over 120,000 road fatalities annually, with nearly four times as many injuries. Safety standards in buildings and public spaces often remain below global benchmarks, especially in fire safety, electrical systems, and structural design. Issues surrounding land rights, labour reforms, tribal welfare, and youth unemployment remain politically sensitive and susceptible to exploitation.
The geography of risk is evolving in India. Earlier, violence was largely concentrated in Jammu & Kashmir and parts of the Northeast. In recent years, urban centres have experienced a rise in political activism, protests, petty crime, traffic accidents, flash floods, and health-related challenges. The boom in e-commerce and rapid delivery services has introduced new digital vulnerabilities and increased road accidents involving delivery personnel.
Although the last decade has seen a reduction in terror incidents in major cities, threats persist due to a volatile regional environment. Government initiatives targeting left-wing extremism may help reduce the influence of Maoist groups.
Climate change is intensifying the frequency and severity of extreme weather events. Urban areas, with their weak infrastructure and inadequate drainage systems, are especially vulnerable. Flooding during monsoon seasons is now a regular concern in many large Indian cities.
Air pollution remains another critical issue. According to CNN, 13 of the 20 most polluted cities in the world in 2024 were in India. Delhi continues to be the most polluted capital city globally for the sixth year in a row. Other highly affected cities include satellite urban centres like Faridabad, Noida, Gurugram, and Greater Noida. Each winter, the National Capital Region is engulfed in smog, triggering health emergencies and disrupting transportation. India’s neighbours, Pakistan and Bangladesh, also rank among the world’s most polluted countries. Despite campaigns like “Clean India,” sanitation and hygiene remain areas needing attention.
A study by Carnegie Endowment for International Peace found that more than 150 countries have witnessed significant anti-government protests since 2017. Some, such as Bangladesh and Syria, saw regime changes as a result. In India, protests and civil unrest can stem from a variety of causes, including politics, religion, farm laws, transport issues, labour disputes, price rises, or dissatisfaction with policies. Polarisation, rumours, and rapid information dissemination through social media often compound the impact.
India Risk Map 2025 by MitKat Advisory (see below) offers a visual representation of the risks described above.
The outlook for 2025 suggests a period of moderate stability and consistent growth interspersed with pockets of geopolitical uncertainty. Managing relations with both the US and China will require skill and adaptability. India’s foreign policy will likely remain pragmatic and multi-aligned, with a focus on protecting national interests in a dynamic global environment.
Key challenges remain. India must address structural issues such as unemployment and inequality. Reforms that make it easier to do business, reduce regulatory burdens, and accelerate formalisation are essential. Currently, only 15 per cent of the Indian economy is formalised, compared to 60 per cent in Brazil.
The reorganisation of global supply chains presents both opportunities and vulnerabilities. Business leaders who anticipate risks and adapt proactively will be better positioned to not just survive but thrive.
Disclaimer: This article references publicly available information from sources including, but not limited to, the World Economic Forum Global Risks Report 2025, MitKat India Risk Outlook 2025, datasurfr.ai, Morgan Stanley, CNN, TV, and news outlets.
