Some economic clouds on our global horizon

Context:  Clouds of menace from global economic weather systems beginning to cast a risk-laden shadow over the Indian economy.

Challenges before reviving Indian economy

• US program to decelerate its bond purchase: Decision to decelerate $15 billion every month to reach $120 billion. It adversely impacts asset prices everywhere, pushing Indian markets down unstable path.
• Rising Inflation: Due to unending liquidity ever since Covid struck. Higher transport costs are feeding into retail prices.
• Continuing supply shocks: Supply chains disrupted by the pandemic are struggling to catch up with rising demand as economies open up.
• Shortage of semiconductor chips, which has impacted sales of a wide variety of products, from cars to consumer durables, and could even delay the country’s digitization.
• Rising energy prices, with Opec-plus (which includes Russia) rationing oil output.
• Three-pointed risk vector of tapering: Sustained inflation in America, which pushes the US Fed to taper faster, global inflationary impulses and higher interest rates in advanced economies could potentially play havoc with India’s economic revival plans.
• Additional shudders from China: Collapse of Evergrande under debt would affect credit markets all around globe and have unpredictable effects.
• Blow from climate action:  Putting price on carbon emissions will likely to pass on additional cost to customers of polluting states that have to pay for their carbon dioxide exhaust.  

Conclusion: Both RBI and the government will have to exercise due vigilance on the risks arising due to varying strategies of advanced economies. 

==========================================================================================