All the world's a stage and we got to play unexpected parts in 2023

First, the global clan of economists shone through the year for being off the mark, much like the weather department. One can remember doomsday being predicted in January. But revisions were made through the year and the much anticipated hard-landing turned into a soft-landing as the world economy looked stronger than expected. To quote Tom Stoppard, we give advice by the bucket, but take it by the grain.

Second, the name Silicon Valley Bank (SVB) was not really known in India until it collapsed in the US and along went others like Signature Bank and Silvergate Bank. In rudimentary terms, over- investment in safe US Treasury bonds did it, as the US Federal Reserve raised rates and the value of their holdings collapsed. In less than 72 hours, we had a plethora of experts talking with authority about SVB, and several seminars and webinars waxed eloquent on how India was different. A revelation was that the US does not have mandatory deposit insurance. Never mind that we just emerged from the NBFC crisis a few years back. Life’s little ironies is what Thomas Hardy may have said.

Third, as normalcy was restored after the Fed offered an assurance, talk of the US hitting its debt ceiling and a possible shutdown of the administration made waves. One could say that it was ‘just politics and processes, stupid,’ but the thought of a US default reverberated, even though everyone knew that this would never happen. But as Fitch downgraded the US’s sovereign credit rating, there were those surreptitious smiles of schadenfreude all over. Conferences made hay back home with the theme of de-dollarization in the air. A case of ‘taming of the shrew’?

Fourth, discussions on de-dollarization began to assume a touch of hubris as the topic shifted to how the Indian rupee could replace the dollar. After all, as the playwright Stoppard said, every exit is an entry somewhere else. India was the world’s fastest growing major economy anyway, and with several agreements being signed with other countries on using the rupee along with UPI, one may have thought we were on the verge of internationalizing our currency. This symphony was attended by a feeling of déjà vu, as seminars discussed how we would be the fulcrum to the world’s future, thanks to ‘China plus one’ business strategies. Never mind that this aria been playing for over 4 years now.

Fifth, as optimism spread on India’s economic power, there came the much-awaited news that Indian bonds will be part of the JPMorgan bond index. Out came calculators on how many dollars would flow in. Estimates varied from $25 billion to $100 billion, while the time period for it was left open. Just like the poet P.B. Shelly said, if winter comes, can spring be far behind? Other global bond indices were expected to follow suit.

Sixth, the Israel-Hamas war once again brought economists to the fore making all kinds of projections for oil prices. Israel and Palestinian territories produce no oil, but assumptions were made of how regional sympathy for the Palestine cause will push prices up to levels of $100 plus per barrel. Extrapolations were made for India through the labyrinth of fuel subsidies, oil marketing company losses, its fiscal impact, inflation, etc. But this crisis blew past the world economy much like what the bard would call an ‘idle wind’.

Seventh, the G20 summit created all the right sounds and many people forgot that every member gets a chance to host it by rotation. Yet, the hype was palpable. Over 220 meetings were held in 60 cities, with several motherhood statements being made and reiterated. Host cities were done up in typical Potemkin style as discussions took place and bonhomie flowed. ‘Was it a vision or waking dream,’ the poet Keats would have said as the sound and fury went past and it’s hard to tell what substantive gains were made.

Eighth, news of the withdrawal of ₹2,000 notes rang bells of demonetization some 7 years ago, as people rushed to change or deposit the same. Was it a measure to remove black money just before election time? Or was it a routine part of a ‘clean notes’ policy? Almost all the notes came back into the system and one could say all’s well that ends well. A nagging question is that if the policy of clean notes is pursued, will the ₹500 note see similar action next year? Shakespeare would say, ‘Give every man thy ear, but few thy voice.’

Ninth, just as news broke that India had lost the World Cup cricket final, a social media post went around claiming that India’s GDP had crossed the $4 trillion mark. And this was not on 1 April. There was jubilation among those who go by social media for news, until it was realized that it was incorrect, as GDP figures come in with a lag and this data is not like a stock-market ticker that changes by the second. To those who did not understand these nuances, it looked as if a $5 trillion economy was not far off and it was reasonable to talk of $7 trillion. As the bard said, thought is free.

Last, the ‘fastest growing economy’ epithet spread far and wide as second-quarter GDP growth for 2023-24 came in at 7.6%, which was ‘beyond expectations.’ The applause was palpable while the hands kept clapping. Manufacturing had revived, with growth of 13.9%. But wait, wasn’t there a fall in the sales of this sector? Sure, it did fall. But GDP is about value added and that includes profits, which rose sharply. So we can have GDP growing with sales falling! That’s how the numbers stack up. As the playwright Shaw said, ‘You never can tell’.

A very happy new year to all as everyone awaits the next round of forecasts.

These are the author’s personal views.