Certainly, uncertainty has declined

Over the past year, global macroeconomicstability has improved, which sets the stage for good growth from 2024

- AJAY SHAH

One year ago, there was unusual uncertainty in the world. Sustained developed-market (DM) inflation was hard to diagnose, the US Federal Reserve was going to raise rates to an unpredictable extent - an act that was going to inflict damage on unpredictable pockets of the world economy, Russian President Vladimir Putin had invaded Ukraine, and China had lost its way. Over the year, the radical uncertainty has subsided and a healing can now commence. This helps us interpret the immediate difficulties faced by many firms and individuals in India, and make a strategy from here.

By late 2021, some of us knew that the world economy was in for a torrid time. The foundations of price stability seemed to be under question and central banks globally would be raising rates dramatically if they were to protect the hard-won gains in credibility of the post-1983 period. But alongside this, we knew that sharp global tightening would trigger difficulties in as yet unknown aspects of the world economy.

In this difficult situation, we got two more problems: Russia attacked Ukraine and China followed the policy of zero Covid through repression.

There was radical uncertainty in this period as the pieces of the puzzle interacted with one another.

The phenomena in front of us (Covid, inflation, Russia, and China) were not in the historical experience, so our models - the mental maps with which we navigate the world-were less reliable. February 2022 was a turning point in the data, where the Fed started hiking interest rates and Russia invaded Ukraine. It is striking to see how (appropriately measured) Indian export growth stalled at this point in time.

We are now able to look back and decipher this year that uncertainty has declined greatly.