The Reserve Bank of India’s monetary policy statement gives a bird’s eye view of global developments and the state of top economies in the world every two months and by extension the developments that have a bearing on the domestic economy.
The statement normally contains a reference to the heightened risks that are visible across economies — both advanced and emerging — and although couched in generalisms, does flag those issues that can have a potential negative effect on our trade and commerce.
This time, there was an expectation or perhaps curiosity about how the RBI would deal, in its international tour de force, on the border tension with China that has been dominating the headlines for the past month.
China is, after all, our main trade partner with annual bilateral trade at about $71 billion, although weighted in their favour. A couple of thousand soldiers are said to be standing eyeball to eyeball at the Doklam plateau in the tri-junction on the Indo-China-Bhutan border.
And though there has been no actual shooting, the war of words has been going on with snide remarks from the Chinese officialdom about teaching us another lesson — a reference to the 1962 border war that India got bruised in.
Would there be any caution or warnings from the RBI about possible negative impact on trade, one wondered.
Well, the answer to that question was simply that the RBI bypassed it. There was no reference to the problems that have bedevilled the ties recently.
Perhaps, it is in keeping with the official Indian stance of not ratcheting up tensions even more and avoiding any sign that we are ‘over-reacting’ to Chinese provocations. Or, may be a confidence that the problems are temporary and will not hurt the trade channel at all.
If you were a trader with exposure to China, you would certainly want to know what to make of the RBI’s risk perceptions at the macro-level.
It’s therefore surprising that the statement makes no reference to China — except to mention that economic growth was regaining some lost ground there in the second quarter and that Chinese demand had increased global metal prices.
Perhaps, the RBI too is playing the diplomatic game.