TIME TO REVITALISE THE ACT EAST POLICY

THE OMICRON THREAT ON THE GLOBAL ECONOMY, THE EMBOLDENING OF TERROR GROUPS AFTER THE TALIBAN TAKEOVER IN AFGHANISTAN AND CHINA’S GEOPOLITICAL AMBITIONS SPELL UNFORESEEN CHALLENGES FOR INDIA

- SHYAM SARAN

The new normal is anything but ‘normal’. 2022 will be a more unpredictable year than the one we left behind. The Covid-19 virus is mutating all the time and the world is unable to keep up. Just when we thought the worst may be behind us, the more transmissible Omicron variant is spreading across the world. Borders which were being opened tentatively, gingerly are snapping shut again. Airline business, which was limping back to solvency, is likely to face terminal decline and most service industries, such as hotels, restaurants, travel and retail, will further suffer severe blows. The major world economies responded to the health crisis and the acute economic and social disruptions in the wake of the pandemic by expending an estimated $11 trillion (Rs 819 lakh crore) over the past two years. There is not much firepower left in their economic armouries to sustain such massive outlays for another year.

We are experiencing the beginning of an inflationary surge. This is likely to sharpen in 2022. If central banks in the advanced economies react by raising interest rates and reducing the liquidity overhang built up over the recent past, then developing countries, including India, are likely to see significant financial outflows. Their cost of external borrowing will go up. 2022 will be a more challenging year for both the developed and developing economies but as is always the case, the latter will suffer the most. India has seen some welcome signs of economic recovery lately, but this will be difficult to sustain.