Quick takes, analyses and macro-level views on all contemporary economic, financial and political events.
The year that has gone by is very good for the year that begins today: it was bad enough to make any normal year look dazzling. The point, however, is to make 2021 a good year compared to a normal year. And it is not all that difficult, whether in politics or economics.
In India, the Supreme Court could easily step in to curb the excesses taking place in several states in the name of love jihad, and that would immediately lighten the political mood. If the government can persuade the protesting farmers to discuss the modalities of diversifying their crops away from grain and towards oilseeds, lentils and fruit, rather than on maintaining the status quo, everyone would be better off, on the farm and off it.
The first month of the new year itself will witness approval and roll-out of the Covid vaccine. Vaccine supply might look challenging in the initial days, but as a good many of the 126 vaccine candidates undergoing trials around the world prove their worth and commence production, pricing and logistical requirements would be the constraint on availability, not production.
Once a sufficient proportion of the population, upwards of 60%, has been vaccinated, the economy can get back to normal. Not just Covid vaccines, Covid therapies also might meet with success, taming the pandemic. For the rest of the year, central banks would focus on preventing any slide in economic recovery, rather than on mopping up the liquidity they have unleashed on the world. Bold Indian companies would turn beautiful by making good use of the cheap liquidity on offer.
Underutilised capacity is unlikely to run out in a year, meaning that inflation is likely to stay in check, even as production zooms around the world. Supply constraints would ease, removing that source of inflation as well.
Prudence calls for investors to de-risk themselves from the likely reversal of excessive run-up of asset prices. Growth is the prerequisite for that. The government can buoy growth by using its 2021-22 budget creatively, to step up investment in the economy.
This piece appeared as an editorial opinion in the print edition of The Economic Times.