If the US can do it, why not India?

Conversation on economic policy has changed completely in the US. "Neoliberalism, the Washington Consensus, market fundamentalism -- call it what you want -- has been replaced with something very different," celebrates Prof Dani Rodrik. "In macroeconomic policy, debt and inflation fears have given way to a preference for over-stimulating the economy and downplaying the risks to price stability." A study by 4 universities in the US presented a paper that posited that "When wages are rigid downwards -- they don't fall as easily as they rise", though it "may cause overall inflation to exceed the central bank's target, it could be desirable nonetheless." "The world is facing a dangerous bout of 'stagflation' as the economic recovery slows and prices rise, experts have warned," thisismoney.co.uk. "The slowdown poses a problem for central bankers, who are facing the dilemma of whether to withdraw economic support to tame inflation while running the risk of stunting the recovery." Because of scattered lockdowns due to Covid, in August, "Services were shut...at a terminal at Ningbo-Zhoushan port after a worker was infected with the Delta variant of Covid-19. Ningbo-Zhoushan in eastern China is the world's third-busiest cargo port," BBC. "The world's third-largest container carrier said it's capping spot rates for ocean freights for the next five months, yielding to pressure from some customers and regulators concerned that global trade disruptions have pushed the cost of shipping too high," Economic Times (ET). "The cost of shipping a 40-foot container from Shanghai to Los Angeles reached $11,569 in the past week, nearly eight times higher than pre-pandemic levels, according to the Drewry World Container Index." "Chips are set to remain in short supply for at least a year as demand for carmakers and other manufacturers remains robust, and ramping up production capacity takes time, said the head of Southeast Asia's Integrated Micro-Electronics Inc., Mint. "Still optimists insist that this is all temporary. Once Delta fades and benefits expire, workers will return to the labor market, production bottlenecks will be resolved, output growth will accelerate, and core inflation -- now running at 4% in the US -- will fall back toward the Fed's 2% target by next year," wrote Prof Nouriel Roubini. The problem is the Federal Reserve, which "Like most central banks, it has been lured into a 'debt trap' by the surge in private and public liabilities (as a share of GDP) in recent years," and "exiting QE too soon could cause bond, credit and stock markets to crash". "Nevertheless. there is a risk that changes in the US will be misunderstood in other countries and that policymakers elsewhere will blindly copy American remedies without paying attention to specificities of their own circumstances," Rodrik. The Reserve Bank of India (RBI) has no such problems. It kept "the repo rate unchanged for the seventh time in a row at 4 percent, citing the need to support the ongoing growth recovery amid continuing uncertainty and global financial market volatility", Hindustan Times (HT). "Retail inflation cooled to a four-month low of 5.3 percent in August from 5.59 percent in the previous month, led by subdued prices of food articles and a high base effects," Business Standard. The inflation target for RBI has been set at 4%, but can oscillate between 2% and 4%, ET. Last year in August, retail inflation grew at 6.69%, Indian Express. At that time, the RBI did not react because the wholesale price index (WPI) was low at 0.16%, New India Express. Now, however, "Wholesale prices quickened to 11.39% for August showing a trend that's in opposite direction of retail prices on the back of hardening of non-food articles, mineral oils," ET. India's stock market indices, the Sensex and Nifty, are trading at record highs, moneycontrol. This is increasing risks for the economy concluded new research by Bloomberg Intelligence and Bloomberg Economics, ET. If the US can do it so can we. Monkey see, monkey do.