Will risks go away by themselves?

"IMF believes fast growth in 2021 is not a one-off recovery from Covid, and India is bouncing back to miracle growth status after having gone downhill from 8.3% in 2016-17 to 4.2% in 2019-20 before Covid struck," wrote Swaminathan A Anklesaria Aiyar. However, major challenges will be the Omicron variant of Covid, high inflation, rate of the goods and services tax (GST) maybe hiked by 1.5% and central banks may start to increase interest rates. "Barely 40% of Indians seek work, and just 38.2% are employed according to the Periodic Labor Force Survey," "Education remains a black hole," and "political risks to economic reform have soared with the success of farmers' agitation." "India's central bank will likely go slow on normalizing its monetary policy settings, breaking step with hawkish global peers to ensure a durable recovery in Asia's third largest economy, according to economists," ET. The RBI projects liquidity to remain elevated at Rs 6 trillion in 2022-23 and 2023-24, down from Rs 10 trillion today. "India's big manufacturing and consumer goods companies are considering another price increase in the next few months, having already made at least two-three hikes earlier this year," and "Fast-moving consumer goods (FMCG) said they may raise prices 4-10% in the next three months," ET. "Looking back, 2021 was a bad year for consumers as they grappled with high prices and many also saw decline in incomes, job as well as business losses," ET. "However, the gradual pick-up in the economic growth and good crop prospects due to normal monsoon will help soothe the prices going forward." Does it mean prices will fall or that the rise in prices will be less than this year's? If the price of pakoras went up from Rs 100 to Rs 200 per plate in 2021, it is a rise of 100%. If the price goes up by another Rs 100 to Rs 300 in 2022 it will be an increase of only 50%. Economists may cheer a lower percentage rise but for consumers the rise is the same in absolute terms. This is called base effect and is useful for politicians. While there are high risks for the economy in 2022, the same applies to individual investors. "While fixed deposits gave negative returns after adjusting for inflation and gold was a losing investment (all returns as of 17 December), stock prices surged and cryptos went through the roof," wrote Vivek Kaul. The BSE Sensex jumped from 25,981 on 23 March 2020 to 61,766 on 18 October 2021. "Foreign Institutional Investors have unloaded nearly $7 billion worth of shares in the last two months and since the beginning of the financial year , FIIs have sold nearly $13 billion worth of shares," BI. Which means that "stock prices have been driven primarily by domestic Indian investors". Indian investors have also been piling into Initial Public Offerings (IPOs) even though returns are poor in the long run, wrote Diva Jain. "With their expectations tinted by the rosy extrapolations of recent returns, investors rush into IPOs ignoring the weight of evidence that would contradict their expectations." The risks are known and may possibly be averted by preventive action by the RBI. But, there are a lot of state elections coming up, wikipedia. Not a good time to rock the boat. Even if it sinks later.