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India could see a shift in foreign direct investment (FDI) trends in the second term of Donald Trump (Trump 2.0) as President of the United States, says a research report by the State Bank of India. The report highlighted that under his first term, Trump 1.0, the Trump administration made sweeping regulatory changes aimed at attracting investments back to the U.S., which impacted FDI inflows globally, including India. It added that if similar policies are reintroduced in Trump 2.0 also, it could create challenges for emerging markets like India, which rely on FDI as a significant driver of economic growth. Notably, a recent Kotak report highlighted that a complete Republican control over all arms of the US government would mean increased US earnings via corporate tax cuts, higher tariffs on imports into the US and greater US fiscal deficits. The first two could spell doom for emerging markets like India and China, since foreign investors will make a beeline for investing more money in the US markets, which will come at the cost of intense selloff in emerging markets. However, higher fiscal deficits will eventually lead to the dollar weakening after the initial euphoria dies down. "India may see shifts in foreign direct investments (FDIs) during Trump 2.0. The Trump 1.0 administration saw significant regulatory changes aimed at attracting investments back to the US," the SBI report stated. However, given that India has been gradually diversifying its sources of FDI (foreign direct investments), this trend could serve as a buffer against any potential decline. Moreover, domestic institutional investors have been stepping up big time, maintaining some balance to the massive exodus of FIIs over the past month. So far in November 2024, FIIs have withdrawn Rs 19,849 crores from the cash segment in Indian markets, while DIIs have poured in Rs 14,014.18 crores as of November 10th, 2024. "India is no longer dependent on the traditional sources of FDI inflows... unlike the recent past, FDI is now coming in many new sectors," noted the SBI report. Unlike a decade ago, when most FDI inflows came from a limited number of traditional sectors, India is now attracting investment in a wide array of industries, including renewable energy, sea transport, medical devices, and surgical appliances. Data suggests over the last 24 years, i.e., between April 2000 and June 2024, FDIs have poured in $1,013.4 billion in the Indian economy. Out of this, 67%, i.e., $689.88 billion, has come in just the last 10 years. The report added there are up to 12 emerging sectors showing strong FDI interest, which could help offset any loss of inflows in conventional sectors if there is a shift in global investment patterns under another Trump administration. In the last financial year, the top 5 sectors that have received the highest quantum of FDI inflow include the services sector (finance, banking, insurance, and business) which makes up about 16% of the inflows. This is followed computer software &amp; hardware, which constitute around 15% of total FDI flows. Trading and telecommunications follows with a share of 6% each, and Automobile Industry comes next with a 5% share. In the short term, the potential for increased U.S. tariffs, more restrictive H-1B visa policies, and a stronger dollar could bring some volatility to India's trade and investment landscape. However, in the long term, these challenges might also encourage India to expand its manufacturing capabilities, diversify export markets, and focus on becoming economically more self-reliant. Notably, India has maintained a merchandise trade surplus with the U.S. despite tariffs imposed during Trump's first term. This indicates that Indian exports have remained resilient, and there is potential to strengthen this trade relationship further by capitalizing on emerging sectors and reducing dependency on traditional industries. Suman Chowdhury, Executive Director &amp; Chief Economist, Acuité Ratings &amp; Research Limited cautions that in the medium to long term, the trade relationship with the US may see a structural improvement. "Higher tariff and trade restrictions in the US with China should translate into better opportunities for exports of manufactured goods from India", he adds.

FDIs may shift to US under Trump 2.0 but it is unlikely to severely impact FDIs inflow to India, says SBI Report

India’s Chief Economic Advisor (CEA), <keyword id="20690607" type="General" weightage="20" keywordseo="V-Anantha-Nageswaran" source="keywords">V Anantha Nageswaran</keyword>, remains optimistic about the nation’s economic prospects despite a slower-than-expected <keyword id="19972825" type="General" weightage="20" keywordseo="GDP-growth" source="keywords">GDP growth</keyword> in the second quarter of FY2024-25. Speaking at the Bharat @100 Summit hosted by Assocham, he said that the fundamental health of the economy remains robust, according to a report by aNI. Nageswaran highlighted several indicators demonstrating the economy’s resilience. “If you run through the checklist for the <keyword id="19948184" type="General" weightage="100" keywordseo="Indian-economy" source="keywords">Indian economy</keyword>, the health is pretty robust,” he noted, pointing to controlled levels of external debt as a share of GDP, declining non-performing assets in the banking system, and stable inflation trends. Although certain food items have caused inflationary spikes, their impact is limited within the overall consumer price index basket, he explained. The CEA praised the shift in fiscal expenditure priorities over the past seven years, with greater focus on capital investments rather than revenue spending. This reallocation, he suggested, has bolstered long-term economic stability and growth potential. India’s GDP growth for the July-September quarter was 5.4%, significantly below the Reserve Bank of India’s forecast of 7%. While this has sparked concerns among economists, Nageswaran urged against overreacting. Erratic monsoons and excessive rainfall disrupted economic activity in Q2, he explained, while global uncertainties and supply chain pressures further weighed on growth. Despite these challenges, he maintained confidence in the broader growth narrative, citing improvements in key economic metrics. For instance, India’s gross capital formation has risen from 27.3% of GDP in the second decade of the 2000s to 30.8% today. Private consumption remains steady, and exports—spanning both services and manufacturing—continue to perform well even amid challenging global conditions. Nageswaran also underscored India’s growing competitiveness in international trade. He noted that the nation’s total <keyword id="24325087" type="General" weightage="20" keywordseo="exports-as-a-percentage-of-GDP" source="keywords">exports as a percentage of GDP</keyword> now surpass China’s, showcasing its resilience and adaptability in a shifting global trade environment. However, he cautioned against reading too much into quarterly fluctuations, highlighting the impact of geopolitical developments such as trade restrictions from the US on critical minerals and rare earths, as well as policy shifts in China. These external factors, he suggested, are likely to persist and may continue influencing short-term economic trends. (with ANI inputs)

Indian economy is resilient despite Q2 challenges, says CEA Nageswaran

<ul class="summary-list"><li>US real GDP grew at an annualized rate of 2.8% in the third quarter of this year, less than the forecast.</li><li>This means the economy is still growing healthily — even if it was weaker than expected.</li></ul>In the third quarter, US economic growth fell short of expectations but remained strong.A news release from the Bureau of Economic Analysis said real gross domestic product rose at an annualized rate of 2.8% in the third quarter of the year, less than the <a target="_blank" class="" href="https://www.investing.com/economic-calendar/gdp-375">forecast</a> of 3%."The increase in real GDP primarily reflected increases in consumer spending, exports, and federal government spending," the news release said. Consumer spending was a particular highlight, with personal consumption expenditures growing at a strong 3.7% annualized rate.Real GDP rose at an annualized rate of 1.6% in the first quarter and 3% in the second quarter.The weaker-than-expected GDP growth doesn't necessarily mean the US is heading toward a recession. There's still a lot of strength in the economy. Layoffs remain low and inflation-adjusted wage and income growth are back to their strong pre-pandemic trends.The presidential election is less than a week away, and <a target="_blank" class="" href="https://www.businessinsider.com/what-is-going-on-with-economy-jobs-inflation-election-voting-2024-10">the economy is top of mind for voters</a>. Additionally, the Federal Reserve will announce its next interest-rate decision on November 7. The Fed has several recent data releases, in addition to the upcoming jobs report on Friday, to help it determine whether or how much it will cut rates. Before the GDP report, <a target="_blank" class="" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html">traders</a> expected the central bank would cut rates by 25 basis points in November. That was still the case after the report, with a probability of around 96%.The US economy has generally been strong since recovering from the 2020 Covid recession, and the new GDP reading adds to this. David Kelly, chief global strategist at J.P. Morgan Asset Management, said in a note that "in an economy that has averaged 2.1% growth since the start of this century," adding that anything between 2.5% and 4% "shows a continuation of above-trend real growth."Wednesday's reading is the advance estimate based on early data collected by the Commerce Department, so it could change as more information rolls in. Hurricane Helene in September and Hurricane Milton in October affecting businesses could impact GDP in the third or fourth quarter; it may mean larger revisions upward or downward.Mark Hamrick, a senior economic analyst at Bankrate, told Business Insider earlier this month that because economic data will likely be "foggy" because of issues like strikes and recent hurricanes, "we may have to employ a little bit of patience to get through the end of the year and hope for better visibility about economic data."This is a developing story. Please check back for updates.

US economic growth came in slightly under expectations but consumer spending remains strong

India's services sector showed robust expansion in October, per the <keyword id="22267674" type="General" weightage="20" keywordseo="HSBC-India-Services-PMI" source="keywords">HSBC India Services PMI</keyword> (Purchasing Managers' Index), which rose to 58.5 last month, up from September's ten-month low of 57.7. October's figures managed to exceed even the long-run PMI average of 54.1, largely on the back of a strong sales pipeline and elevated demand. Employment, or job creation in this sector accelerated to its fastest growth rate in 26 months. Anticipating solid, sustained demand in the near term, firms added new employees at the most rapid pace in over 2 years. October also saw <keyword id="23834175" type="General" weightage="20" keywordseo="input-costs-rise" source="keywords">input costs rise</keyword> at their fastest pace in 3 months, indicating renewed demand and economic activity in the country. The ISM Services PMI, an indicator of the economic health of the US, also exceeded expectations, reaching 56.0 compared to the forecasted 53.8, suggesting strong growth within the services sector. "During October, the Indian services sector experienced strong expansions in output and consumer demand, as well as job creation, which achieved a 26-month high," said Pranjul Bhandari, Chief India Economist at HSBC. The sector saw increased business activity across multiple fronts, with export sales showing significant growth and companies reporting stronger demand from international markets including Africa, Asia, the Americas, the Middle East, and the UK. However, industry experts remain cautiously optimistic about the sector's prospects. Suman Chowdhury, Chief Economist at Acuité Ratings &amp; Research, noted that while the October recovery is promising, several factors warrant careful monitoring. “The recovery in the PMI indices in October 2024 is promising for the second half of the fiscal after the dip in several high-frequency indicators in September 2024. Industrial and service activity has expectedly received a boost from the anticipated spike in consumption demand in Q3 FY25, driven by the festivities and the marriage season," she said. Chowdhury added that it will be crucial to monitor the sustainability of these PMI indices at these elevated levels, given the reported weakness in urban demand in Q2 as flagged by FMCG companies. She also noted that potential increases in wholesale and core retail inflation, combined with higher input costs and wage pressures, could delay expected interest rate cuts. RBI governor Shaktikanta Das also noted that inflation and CPI figures for October might be elevated, pushing ahead any chances of interest rate cuts in the near future. Acuité Ratings &amp; Research maintains its GDP growth forecast at 7.0% for FY25 while acknowledging the multiple downside risks that will require close observation in the coming months.

India's Services Index jumps to 58.5 in October as employment grows the fastest in 26 months

Dear readers, As we approach yet another weekend, here are some key developments across various sectors. Nvidia has surpassed Apple to become the world’s largest company, driven by the AI boom. Meanwhile, the US Federal Reserve cut interest rates, by 25 basis points to 4.75%, the second such reduction in 2024. In the workplace, Gen Z’s approach to mental health got attention, with one employee taking a week off after a breakup. Additionally, Indian banks are expecting steady growth, despite challenges in unsecured lending. Read on for all the details! <h2>Top stories from the week </h2> Indian banks to have steady growth in earnings over next 3-4 years, fees from unsecured lending may dip, notes Jefferies report Jefferies forecasts steady earnings growth for Indian banks over the next 3–4 years, with a 13% annual loan growth rate. However, a decline in unsecured lending could reduce fee income. While net interest income is expected to grow at 12%, challenges such as rising defaults and a potential dip in rate cuts could affect profitability. Despite this, banks’ return on equity and assets remain promising. <a href="https://www.businessinsider.in/finance/news/indian-banks-to-have-steady-growth-in-earning-over-next-3-4-years-fees-from-unsecured-lending-may-dip-notes-jefferies-report/articleshow/115048179.cms" data-type="tilCustomLink" target="_blank">Read more</a> Nvidia becomes world’s largest company amid AI boom, surpasses Apple in the race Nvidia has surpassed Apple to become the world’s largest company by market capitalization, driven by the AI boom. The company’s strong performance is fueled by surging demand for its chips used in AI technologies. With a market cap hitting $3.43 trillion, Nvidia continues to dominate the AI hardware sector, powering data centres and AI research. The company’s revenue growth of 122% YoY further cements its leadership in the AI space. <a href="https://www.businessinsider.in/business/news/nvidia-becomes-worlds-largest-company-amid-ai-boom-surpasses-apple-in-the-race/articleshow/115003223.cms" data-type="tilCustomLink" target="_blank">Read more</a> ‘He had a breakup and took a one-week leave’: Manager shares about his Gen-Z employee, internet reacts A manager’s tweet about granting a Gen Z employee a week off for a breakup sparked widespread debate. While the manager expressed frustration over project delays, internet users defended the employee’s mental health needs, criticizing the manager’s lack of empathy. Some supported the manager’s view, pointing out generational differences in work culture. The incident went viral, furthering discussions about Gen Z’s unique workplace expectations. <a href="https://www.businessinsider.in/careers/news/he-had-a-breakup-and-took-a-one-week-leave-manager-shares-about-his-gen-z-employee-internet-reacts/articleshow/115041747.cms" data-type="tilCustomLink" target="_blank">Read more</a> US Fed cuts interest rates by 25 bps, Powell notes Trump’s victory to have no impact on policy decisions The US Federal Reserve has cut interest rates by 25 basis points to 4.75%, the second such reduction in 2024. Fed Chairman Jerome Powell emphasized the Fed’s independence despite Trump’s criticism and suggested that the economic outlook remains uncertain, though the Fed is focused on inflation targets. Trump’s policies may lead to higher inflation, adding complexity to the Fed’s efforts to stabilize prices. Experts anticipate that bond yields will stabilize, benefiting emerging markets like India. <a href="https://www.businessinsider.in/finance/news/us-fed-cuts-interest-rates-by-25-bps-powell-notes-trumps-victory-to-have-no-impact-on-policy-decisions/articleshow/115070690.cms" data-type="tilCustomLink" target="_blank">Read more</a> Big Tech’s winners and losers from Donald Trump’s win, according to the market After Donald Trump’s election victory, tech stocks surged, with companies like Tesla seeing significant gains. Tesla’s rise was fueled by Trump’s public support for CEO Elon Musk. Conversely, companies like Apple faced challenges due to fears over potential tariffs on China. While some, like Google, might benefit from lighter regulations, others like Meta could face political challenges. Overall, the election results reshaped market expectations for Big Tech’s future. <a href="https://www.businessinsider.in/tech/news/here-are-big-techs-winners-and-losers-from-donald-trumps-win-according-to-the-market/articleshow/115067798.cms" data-type="tilCustomLink" target="_blank">Read more</a> <h2>Top web stories</h2> <a href="https://www.businessinsider.in/entertainment/webstories/donald-trump-on-screen-a-look-at-his-iconic-cameos/slidelist/115045250.cms" data-type="tilCustomLink" target="_blank">Donald Trump on screen: A look at his iconic cameos</a> <a href="https://www.businessinsider.in/india/webstories/8-lifestyle-mistakes-contributing-to-health-problems-in-india/slidelist/115051791.cms" data-type="tilCustomLink" target="_blank">8 lifestyle mistakes contributing to health problems in India</a> <a href="https://www.businessinsider.in/travel/india/webstories/10-magical-indian-experiences-every-traveller-should-try/slidelist/115052527.cms" data-type="tilCustomLink" target="_blank">10 magical Indian experiences every traveller should try</a>

Weekend wrap: Nvidia’s AI-driven surge, Indian banks’ steady growth and more

<ul><li>The <keyword id="19899810" type="General" weightage="20" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="261" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword> will conclude the three-day <keyword id="19913109" type="General" weightage="20" keywordseo="Monetary-Policy-Committee" source="keywords">Monetary Policy Committee</keyword> (<keyword id="19918491" type="General" weightage="20" keywordseo="MPC" source="keywords">MPC</keyword>) meeting today.</li><li>The central bank is expected to announce its decision on policy rates.</li><li>The <keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords">RBI</keyword> has maintained the <keyword id="20094323" type="General" weightage="100" keywordseo="repo-rate" source="keywords">repo rate</keyword> at 6.50% for the past nine meetings.</li></ul>The Reserve Bank of India (RBI) is set to conclude the three-day Monetary Policy Committee (MPC) meeting today, with Governor <keyword id="19913110" type="General" weightage="20" keywordseo="Shaktikanta-Das" source="keywords">Shaktikanta Das</keyword> expected to announce the central bank's decision on policy rates. The meeting, which <a href="https://www.businessinsider.in/finance/news/rbis-monetary-policy-committee-meeting-begins-today-announcement-on-october-9/articleshow/113999887.cms">began</a> on October 7, has garnered significant attention, as the RBI has maintained the repo rate at 6.50% for the past nine meetings. The repo rate has remained steady since the RBI adopted a cautious stance to balance inflation control and <keyword id="19900794" type="General" weightage="20" keywordseo="economic-growth" source="keywords">economic growth</keyword>. Key factors that the MPC is weighing include persistent inflationary pressures, particularly in food prices, as well as global economic uncertainties. According to data from the Ministry of Statistics &amp; Programme Implementation, while All India Consumer Price Index (CPI) inflation moderated to 3.65% in August--within the RBI's target band of 2-6%. <keyword id="19999654" type="General" weightage="20" keywordseo="food-inflation" source="keywords">Food inflation</keyword> remains elevated at 5.65%, above the central bank's medium-term target of 4%. This, coupled with rising global crude oil prices due to geopolitical tensions in West Asia, has intensified concerns over inflation. Despite these challenges, the RBI has so far opted for a status quo on the repo rate, aiming to foster economic recovery after the pandemic. However, today's announcement will be closely watched to see if the central bank shifts its stance, especially given the external pressures and uncertainties surrounding global markets. Economists, however, have noted that the RBI will not make any changes in its policy stance before December. "With the focus on taming headline inflation, the RBI is likely to hold the rates although the core inflation is within the limit. It is possible the RBI may shift to the neutral stand" said M Govind Rao, Member, of the Fourteenth Finance Commission and former Director, of the National Institute of Public Finance and Policy. On September 18, the US Federal Reserve announced a steep 50 basis points interest cut in its review meeting. US Fed announced the rate cuts after holding interest rates steady for eight straight meetings. "In this overarching macroeconomic setting of heightened geopolitical tensions, core inflation inching upwards, oil price volatility, and high food inflation, we anticipate a change in the RBI's policy stance from "withdrawal of accommodation" to "neutral" at its forthcoming MPC meeting on October 9, 2024. However, we do not see any rate action coming and the benchmark interest rates may not undergo any change" said Manoranjan Sharma, Chief Economist, Infomerics Ratings. Earlier this month the central government appointed three new members to the monetary policy committee. The MPC comprises three members from the RBI and three external members appointed by the Central Government. With inputs from ANI. SEE ALSO: <a href="https://www.businessinsider.in/business/auto/news/byd-emax-7-electric-mpv-launched-in-india-starting-at-26-9-lakh/slidelist/114046121.cms">BYD eMax 7 electric MPV launched in India starting at ₹26.9 lakh</a> <a href="https://www.businessinsider.in/personal-finance/news/heres-how-a-reddit-user-was-able-to-get-an-iphone-16-at-under-27000/articleshow/114035179.cms">Here’s how a Reddit user was able to get an iPhone 16 at under ₹27,000</a> <a href="https://www.businessinsider.in/stock-market/news/hyundai-swiggy-ather-upcoming-large-ipos-in-india/slidelist/114014140.cms">Hyundai To Swiggy: Everyone wants to cash in on the IPO bonanza</a>

RBI MPC announcement today: Rates unlikely to change, RBI may change stance to neutral

<ul class="summary-list"><li>Europe could take a hit to GDP in a second Trump presidency, Goldman Sachs analysts say.</li><li>They point to increased uncertainty as the scope of the timing of Trump's sweeping tariffs remains unclear.</li></ul>As the world takes in the results of the US presidential election, regions around the world are determining what a Trump presidency might mean for their economies.Europe could face a big hit to economic growth as trade tensions increase, Goldman Sachs analysts said. The analysts downgraded their growth forecasts across the region, down to 0.8% from their previous forecast of 1.1% for 2025. In 2026, the analysts said they expect growth of 1%, down from 1.1% and lower than the consensus estimate of versus 1.4%. Overall, the analysts expect the Euro area to take a 0.5% hit to real GDP, with the bulk of the downturn set to materialize next year.The analysts point to renewed trade tensions fueled by Trump's proposal for sweeping tariffs on all US imports.More significant than the actual tariff increases, though, will be the trade policy uncertainty that comes with them, the analysts say. That uncertainty will pose a bigger hit to growth than the tariffs themselves, they said. "The actual magnitude of tariff increases might matter less than the uncertainty created by threatening to impose tariffs on Europe," the analysts said in a Wednesday note, adding, "The magnitude of the tariff increase, however, is unlikely to be clear for some time, and so we expect a pronounced further increase in TPU in the baseline scenario."The firm's trade policy uncertainty indicator for Europe has already risen in recent weeks as markets increasingly priced in odds of a Trump win.The analysts acknowledged, though, that while Trump's 10% across-the-board tariff is a clear risk, they expect his administration to initiate a more moderate set of duties on European countries.Those tariffs will likely target auto exports, which are worth $80 billion, or 0.9% of EU exports, the analysts said. The duties will have large impacts to GDP in Germany, Sweden, and Switzerland in particular, they added. During his campaign, Trump proposed raising tariffs on imports from all countries to <a target="_blank" class="" href="https://www.businessinsider.com/trump-tariff-plan-inflation-policy-impact-trade-war-china-rates-2024-5">at least 10%</a>, and said imports from China would be <a target="_blank" rel="" class="" href="https://www.businessinsider.com/donald-trump-impose-tariffs-china-if-elected-2024-2?utm_medium=ingest&amp;utm_source=markets">subject to even steeper 60% duties</a>.The analysts add that a Trump presidency will prompt European countries to up their defense spending to account for a <a target="_blank" href="https://www.businessinsider.com/how-trump-could-handle-ukraine-war-if-reelected-scenarios-2024-10">potential decrease</a> in US military support to Ukraine. That wartime support will cost the EU another 0.5% of GDP every year, the analysts say.The increased spending won't result in a growth boost, either, they say."Any resulting growth boost, however, will likely be limited by modest military spending multipliers in Europe, upward pressure on long-term yields from higher deficits and negative confidence effects from elevated geo-political risk," the analysts said.European officials have long warned of huge growth impacts from a second Trump presidency.Last month, ECB member Joachim Nagel <a target="_blank" href="https://www.businessinsider.com/trump-win-economic-growth-inflation-risks-europe-ecb-germany-2024-10">warned</a> a Trump win could hammer growth and send inflation soaring in Europe, and back in January, ECB president Christine Lagarde said a Trump win is "clearly a threat" to Europe, pointing to his tariff plans, commitment to NATO, and climate change policies.

Trump's presidency will hurt Europe's economic growth amid renewed trade tensions, Goldman Sachs says

<ul class="summary-list"><li>Investors are too optimistic about the near-term prospects of AI, Vanguard said.</li><li>Firms would need to growth profit by 40% annually for the next three years to match valuations, the firm said.</li></ul>With tech companies still <a target="_blank" href="https://www.businessinsider.com/openai-gpt5-gpt4-expectations-ai-2024-7">pushing the boundaries</a> of artificial intelligence, market excitement for it seems endless.But this enthusiasm expects too much from the technology in too little time, <a target="_blank" class="" href="https://corporate.vanguard.com/content/corporatesite/us/en/corp/vemo/economic-payoff-ai-coming-but-not-here-yet.html">Vanguard</a> wrote on Thursday.Wall Street is rife with upbeat forecasts about what AI could do to the economy and corporate profits. Most of them are pinned to a US workplace revolution and a productivity boom.That optimism has helped fuel strong stock gains, with the benchmark S&amp;P 500 up 18% year-to-date through Thursday.But Vanguard global chief economist Joe Davis thinks expectations are too high, and says that stocks are overvalued even if the AI boom plays out as anticipated.He estimates that US corporate profits would have to growth by 40% annually over the next three years to justify where stocks are trading now. For context, the S&amp;P 500's trailing one-year earnings growth rate through the second quarter of 2024 was 10.9%, according to <a target="_blank" class="" href="https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_081624.pdf">FactSet data</a>."I'm optimistic about the long-term potential of artificial intelligence to power big increases in worker productivity and economic growth," global chief economist Joe Davis wrote. "But I'm pessimistic that AI can justify lofty equity valuations or save us from an economic soft patch this year or next."He continued: "This is double the annualized rate of the 1920s, when electricity lit up the nation — not to mention economic output and corporate income statements."Such a historic surge in corporate performance looks even less probable if the economy cools down next year. Vanguard expects GDP to expand by just 1% to 1.5% in 2025.It's not that the investment firm has no faith in AI's potential — its research suggests 45% to 55% odds that AI will trigger a boom in labor productivity. Between 2028 and 2040, that could spur a 3.1% annualized rate of US growth in real terms.But investors need to let go of any notions that this will happen immediately, Davis said. While firms have <a target="_blank" href="https://www.businessinsider.com/how-much-big-tech-spending-on-ai-investments-2024-7">poured billions to advance</a> their position in the sector, some market players are incorrect in thinking that AI investing will reach $1 trillion in the near term:"$1 trillion in AI investment by 2025 would require 286% growth. That's probably not going to happen, which means we're unlikely to experience an AI-driven economic boom in 2025," he said.Some on Wall Street are much more pessimistic. BlackRock has said there's a strong chance that heavy AI investing will trigger <a target="_blank" class="" href="https://www.businessinsider.com/artificial-intelligence-ai-inflation-productivity-boom-interest-rates-fed-blackrock-2024-6">higher inflation</a> before any production boom can come. That could erode corporate profit growth.

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FDIs may shift to US under Trump 2.0 but it is unlikely to severely impact FDIs inflow to India, says SBI Report

Ira Alok Puranik

Indian economy is resilient despite Q2 challenges, says CEA Nageswaran

BI India Bureau

US economic growth came in slightly under expectations but consumer spending remains strong

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India's Services Index jumps to 58.5 in October as employment grows the fastest in 26 months

BI India Bureau

Weekend wrap: Nvidia’s AI-driven surge, Indian banks’ steady growth and more

Divyanshi Sharma

RBI MPC announcement today: Rates unlikely to change, RBI may change stance to neutral

BI India Bureau

Trump's presidency will hurt Europe's economic growth amid renewed trade tensions, Goldman Sachs says

Kelly Cloonan

US stocks are overvalued because of unrealistic expectations for AI-powered economic growth, Vanguard says

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