Yo-yo economy. It will go up and down.

"The year 2018 has started like 2017 ended," wrote SZ Chinoy, Chief Economist at JP Morgan. The global recovery is continuing and unemployment in the US has dropped to 4.1%, but markets have priced in a rise of just 60 basis points in interest rate in the US. Federal funds rate are expected to rise to above 2%, from 1.25-1.5% at present. What about India? Unfortunately, imports are likely to grow by 10% this year, compared to 3% last year, while exports will grow at 4.5%, same as last year, shaving off "a whopping 120 basis points from growth in 2017-18". The problem is oil. Although rising oil prices are a sign of global economic growth, with opportunities for increasing exports, a price of $70 per barrel will cut our growth rate by 40-50 basis points. It depends on why oil prices are rising. "A surge in oil prices driven by supply constraints typically hurts economic activity over a long period of time," wrote N Rajadhyaksha. But it is the opposite if prices are driven higher by demand, which is likely because of "the shale oil revolution". The government can spend more by allowing the fiscal deficit to increase more than the target but that could "do more harm than good". The bond market is flashing red, wrote Chinoy. Corporate bond yields are directly related to yields on government bonds, or G-Secs, which means that lowering of interest rate by the Reserve Bank is not transmitted to the market. Although policy rates have decreased by 200 basis points, yields on G-Secs have come down by 51 basis points and on corporate bonds by only 44 basis points. Having decided to borrow an extra Rs 500 billion this financial year, the government has quickly reduced its requirement to Rs 200 billion because of better than expected tax collection. Or, maybe, the government chickened out when bond yields jumped to over 7.4%, but have now softened to 7.222%. The bond market will immediately punish any fiscal imprudence, wrote T Kundu. This being India, traders are devising new ways to avoid paying the Goods and Services Tax. One way is to reduce the price to the level of a lower tax rate and the other is to bill an item in two halves and charging each at the lower rate. Poor people are unable to repay loans given at soft rates to help them buy their own homes, built at low cost specifically for them, wrote A Nag. People maybe poor but are no fools. If farmers can get loan waivers at a cost of Rs 2.5 trillion then surely there should be a waiver for housing. Current account deficit and core inflation are flashing amber, wrote Chinoy. Emerging markets are more volatile, wrote Prof G Gopinath. That is because of the itch to spend more to win elections and the terror of angering the 'vote bank' by fueling inflation. Yo-yo policies lead to yo-yo in growth.