ndian economy is going through a significant transition in terms of how the country develops itself for the future, whereas on the global front, we are seeing trends completely contrary to what was predicted. In 2008-09, the most important global trend predicted was the movement of interest rates and inflation. US Federal Reserve Chairman Ben Bernanke intervened in a big way by flooding the world with helicopter money. Had you talked to any economist then, he would have said that the outcome of it after 5-10 years would be higher inflation. Comparisons to world wars were drawn as inflation had spiked after World War-II. As a result, most global central bankers over the last two-three years were fighting a battle on inflation, which was not needed. In 2017-18, global central bankers moved interest rates higher, especially in the US. Even India did the same in 2016-17. We were fighting expectations of inflation and the interest rates moved up. People expected inflation to reduce. The major issue was central banks in many countries maintaining high real interest rates. The correction really began in calendar year 2019. That was when people realised that inflation projections were much higher than where it should be as per the state of the economy. That put pressure on the economy. Most people were talking about the US 10-year yield between 3-4 per cent. It is 1.75 per cent. The 2019 has been a year where something has fundamentally and structurally changed in the world where the big bad animal called 'inflation' despite easy money, easy liquidity did not come down. All traditional economists seem to have missed that something has structurally changed in the world. Secondly, the world (also India) in many ways is going through a fundamental behavioural change in the human life cycle, which is changing the pattern of the supply and demand. We all were brought up in a world where owning a home was a big deal. But, we are seeing an emerging structural change of taking a home on rent and moving places between cities. A similar pattern is emerging in owning a car. Do I need to own a car?
Homes and cars are important to economic growth of a country. While these changes are happening, the jury is out whether these are structural or cyclical ones. That said, suddenly, the economy looks very different.
Besides, a different kind of political leadership is emerging in many countries starting with the US president Donald Trump. He is not afraid of saying that he is ready to protect the interest of the country by dumping China. Therefore, a multilateral liberal world for which we were ready and were used to post the Second World War could be staring at a change. Probably, we are in the middle of that change.