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2022 preview: Farmers’ incomes, inflation risks

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On Mondays, the Plain Facts section brings you data-based insights about the coming week. But this is year-end, a time to focus on the year to come. In a two-part series starting today, we present you with 10 key events to watch for in 2022. The first part looks at the Indian government’s big policy targets due next year, the craze of initial public offerings that has taken over the markets, and the FIFA World Cup, among others. Keep an eye on the next five in the second part on 3 January.

Policy Targets

 

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In 2016, the Centre set the target of doubling farmers’ real incomes by 2022. Experts found it impractical to start with: the base figure that needed to be doubled wasn’t even clear for a while. But the government still swears by the goal every now and then. So here comes the test: 2022 is here.

An average farm household earned 10,218 a month in 2018-19, with stark disparity. The pandemic hasn’t hurt agriculture much, but growth was just 3.6% in 2020-21, potentially derailing progress. The year-long face-off with farmers upset with controversial reforms will push the Centre to strategize afresh. This is also the year of India’s 175-gigawatt-capacity target for renewable power. The country installed 8.2GW capacity during April-November, taking the total installed capacity to 104GW. The final leg will be keenly watched. Earlier this year, the International Energy Agency had projected significant additions in 2022, but not enough to meet the target.

IPO Bubble

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IPOs had a record run in 2021, with newly listed companies mopping up over 1 trillion so far to effortlessly top the previous high of 2017. Pumped up by strong retail participation and sharp listing gains, the primary market was abuzz with a flurry of offerings. 

Even at the fag end of the year, when IPOs usually slow down to a trickle, companies are racing to tap the market, making it the busiest December ever.

The momentum is expected to continue in 2022, with IPOs worth 45,128 crore in the pipeline, and another 35 worth over 61,000 crore awaiting the regulator’s approval. But market observers are cautious about whether the frenzy will prevail. New covid-19 variants present too much uncertainty, and top central banks are getting hawkish to rein in inflation. The liquidity glut is set to wane, which threatens a reality check for ambitious newbies in the listed space.

Covid Endemic?

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When 2021 began, the world was still convinced that vaccines would end the covid-19 pandemic. But as we end the year, we know the assumption was foolhardy. New unpredictable variants may still be too smart for vaccines, and gross inequities in vaccination will keep us on the guard for years. In 2022, covid-19 could even become an endemic.

Omicron is already forcing lockdown-like curbs in some countries and is wiping away yet another holiday season. There is some evidence that it is more transmissible than Delta but less severe—ideal conditions for covid-19 to transition into an endemic. If vaccination ramps up equitably, the virus may fade into the background. If they don’t, many more could still lose their lives. India will do well to use the lull to boost its health infrastructure.

Inflation Pressures

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If 2020 was the year of economic devastation and record low interest rates, much of 2021 was about rising inflationary pressures on all fronts: food, energy and supply-side constraints. While most central banks were able to shrug off high inflation prints as “transitory", it’s now clear that rising retail prices were anything but that. Spiralling inflation has already forced many countries, such as Brazil, Russia and Mexico, to hike rates, with the UK also joining the list earlier this month. The US Fed is still in the process of policy normalization before it hikes rates next year. The story is the same for India. Retail inflation has risen to multi-decade highs in several countries and supply chain disruptions could continue next year as well. With the International Monetary Fund warning that inflation could become “sticky" in some parts of the world, 2022 could become the year of rate hikes, especially when the US Fed makes the move.

FIFA 2022

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The 22nd FIFA World Cup starts in Qatar on 21 November next year. This is the first time the top football event will be staged in a Gulf country. FIFA’s financial budget for the tournament includes a total prize money of $440 million for the 32 teams, up 10% since 2018.

For football fans, this World Cup will be different. The tournament will be the first ever to be held at this time of the year to escape Qatar’s harsh summer. The event has also faced scrutiny from human rights watchers for several years. Tourists during the event need to be aware that public drunkenness and public displays of affection are strictly prohibited in Qatar, and women sports fans and sexual minorities will be concerned about their safety. Qatar has come under harsh criticism for rights violations and hazardous working conditions in preparation for the tournament. A sporting gala won’t be enough to make up for the human toll, many feel. 

 

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