Hindistan, Dünya Ekonomisinin Neden Çok Dar Bir Noktada Olduğunu Gösteriyor

Global market trends rarely turn on events in Mumbai. But signals emanating from Reserve Bank of India headquarters demonstrate why all that investors thought they knew about 2023 is going awry.

Just two months ago, the conventional wisdom was that the Federal Reserve would soon take a pause on tightening, China’s economy was set to boom and Japan was done with quantitative easing.

Wrong, wrong, wrong. The Fed is still mulling another rate hike or two as a strong jobs market beats all odds. China’s 5% growth hopes are dimming by the day. And the Bank of Japan is as trapped in the QE quicksand as ever.

Enter RBI Governor Shaktikanta Das, whose decisions offer another example of 2023 being full of surprises.

On Thursday, India’s central bank left its key lending rate steady for a second straight policy meeting. But Das and fellow Monetary Policy Committee officials make clear that further rate hikes are likely.

As Das put it: “It is a pause in this meeting of the MPC and I have not said anything about the pivot. Whatever I said in the last meeting—that it is not a pivot,” Das told reporters.

The pivot in question is one the smartest of the smart money was convinced we’d see by now from Washington to Frankfurt to Mumbai. This week, the Reserve Bank of Australia registered its own surprise. On Tuesday, it defied expectations with a 25 basis-point rise in the benchmark rate to 4.1%.

RBA Governor Philip Lowe says a pivot away from rate hikes will “depend upon how the economy and inflation evolve.” He added that “some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe.”

Again, not at all what many investors were convinced they knew about 2023. Might the same be true of the Reserve Bank of New Zealand? After the rate hike in Sydney, economists wondered whether RBNZ Governor Adrian Orr over in Wellington is wrong to argue the official cash rate won’t need to rise above 5.5% to tame inflation. It matters because the RBA and RBNZ are often seen as bellwethers for the direction of global rates.

Earlier this week, the Bank of Canada shook global bond markets with a sudden rate hike. BOC Governor Tiff Macklem added 25 basis points to the benchmark rate to put it at 4.75%, the highest in 22 years. And with more hikes expected.

Events in Mumbai are also confounding the conventional wisdom. Though inflation eased to an 18-month low of 4.70% in April, the odds of prices dropping below the RBI’s 4% medium-term target seem low. That’s despite the central bank having hiked rates by 250 basis points since May 2022.

The tantalizing question is whether Das and his team might run afoul of Prime Minister Narendra Modi’s government.

Das, remember, is Modi’s third RBI leader since 2014. The first one, globally respected economist Raghuram Rajan, was shunted aside for being too independent minded. Rajan’s misstep, it seems, was being unwilling to play ATM for a government desperate to hasten economic growth.

In 2016, Modi replaced Rajan with Urjit Patel. Only Patel wasn’t the fountain of excess liquidity for which Modi hoped—he was gone by 2018. Enter Das, who’s tried to straddle the dual pressures of supporting growth for a demanding prime minister and curbing inflation.

Surely, Covid-19 complicated that balancing act. In the post-pandemic era, the Das RBI has clearly found its inner inflation hawk. How that—and the specter of more rate hikes this year—goes down with the political establishment in New Delhi is anyone’s guess.

Dynamics in India are a reminder that the fastest global rate hike cycle since the 1980s isn’t over. It’s also in some ways a microcosm for why old-school tightening steps aren’t capping inflation as they did back then.

Much of the inflation plaguing the globe’s top ten economies—India included—is coming from the supply side. The fallout from Covid era demand-supply mismatches and surging energy prices thanks to Russia’s Ukraine invasion are better dealt with via government efforts to increase efficiency and productivity. Here, interest rates are a highly imperfect tool.

Modi’s nine-years in power are coming back to haunt India. For all his strongman histrionics, Modi’s been a rather weak reformer. Some moves to open the economy wider to foreign investors, but few notable upgrades to the microeconomic structure to make India more resilient in the face of global inflation.

Similar critiques could be lobbed at politicians in the U.S., Europe and Japan, of course. But policy moves in Mumbai are a fresh warning that hopes for a gentler, more vibrant 2023 for the global economy aren’t panning out.