Bragging rights?

The banking crisis in the US is "the outcome of two effects that themselves originate from the profligate fiscal spending during Covid," wrote Krishnamurthy Subramanian, Executive Director, IMF. Because, "Unlike India's Covid stimulus, which was carefully targeted at the poor and vulnerable sections of society, the US made no attempt to target its Covid stimulus." This resulted in, first, an increase in deposits of $5 trillion in banks, of which $1.3 trillion was invested in securities, and, second, increased spending resulted in inflation. Strangely, although the Indian government did not resort to fiscal stimulus, retail inflation rose to 7.4% in December 2019 and has been above 4% every single month ever since. rateinflation.com. High and rising prices mean that, "Consumer demand is expected to stay low over the coming quarters, as inflation continues to rise, creating a further slowdown phase for the startups in the country, states a new research by firm Redseer Strategy Consultants." ET. And so, "India's GDP growth for the quarter ended December 2022 moderated to 4.4 percent, as per government data." Even more strangely, "The US Federal Reserve has reiterated that a US slowdown has not led to higher unemployment. It is at a low of 3.4% while the natural rate is considered 4.6%. Yet, GDP growth is down, at 2.1% in 2022. Contrast this to India, where GDP growth is expected to be 7%, the world's highest. Yet, joblessness is at around 7.5%, having varied from 6.4% to 8.3% on a monthly basis during the past year," wrote Madan Sabnavis. "The other challenge is that our labor participation rate has been coming down, which is a serious issue. It is down from around 46% in 2016-17 to 40% in 2021-22." Consequently, "the mean household income for the lowest earning households fell sharply to an annual Rs 65,000 in 2020-21 from Rs 1.37 lakh ( Rs 137,000) five years earlier. In contrast, the richest of those surveyed saw theirs rise to Rs 7.31 lakh (Rs 731,000) from Rs 5.26 lakh." Mint. "This means we must expand job prospects, which painfully languish, and also do what it takes to cool inflation, which is an unseen tax imposed on the poor." "Financial services company JP Morgan has predicted that the United States will enter a recession later this year despite improving signs for inflation and the global economy." Zee. This will lead to risk aversion and a "flight to safety", wrote Rajeswari Sengupta. "There will be a surge in demand for 'safe' assets such as gold, while currencies of emerging economies like the Indian rupee will come under pressure as foreign investors flee these markets." A recession in the US will also mean weaker exports for India. "Recession in the US and Europe mean that India's slowdown has further to run. Uncertainty is likely to further delay private capital expenditure. Consumer discretionary demand is likely to moderate," wrote Sonal Varma. Perhaps, Subramanian shouldn't brag. It's too soon.