PremiumUncertain times have pushed limits in economics, geo and domestic politics. The first is low on hope, with RBI exposed to failure too, the second’s in a fog of war and the third’s also in a haze
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Shifty red lines are a sign of uncertain times. They may eventually yield clarity, but tend to spell uncertainty. All bets need not be off, as a result, but very few can be based on confident odds of outcomes. In the world of economics, a red line once barred extended runs of capital cost inversion, so that liquidity doesn’t go into a financial loop. But ultra-loose policies for pandemic relief have seen central banks lend money at negative real rates of interest for long periods, with lending charges below inflation, the rate at which any sum lent loses its actual worth. The Reserve Bank of India (RBI) has held its repo rate at 4% for nearly two years, with retail prices rising faster. It had pushed the envelope in support of an economy that had hit a covid crater. Yet, while a severe crunch of income can justify bolder risks on inflation, it was only a trial shot. On Friday, RBI finally adopted price-control as its top stated priority. But, even with its outlook on inflation upped and output notched down, its revised forecasts jar with the dicey realities staring at our economy. Its air of confidence on price levels seems particularly odd because its broad stance has not changed and efforts to sponge up liquidity have been gingerly. Moreover, its new window for banks to deposit excess funds at 3.75%, a stand-in for mop-ups of money in lieu of sovereign bonds, appears designed to satisfy its jarring aim of supporting a shaken market for sovereign bonds amid the glut of a fiscal expansion. If our price flare-up worsens, an old red line on easy money blurred by Sars-CoV-2 must regain its resolution.
In the global theatre of geopolitics, a red line was set by America on chemical weapons for an Iran-backed regime in Syria not to use in its civil war, only to be shrugged off once it was flouted. Moscow stepped into the breach, helping Tehran consolidate its West Asian arc of influence. How lightly Russia took US warnings after that was evident in its invasion of Ukraine. While the aggressor’s economy has been squeezed, under no less strain is Nato’s own red line on direct confrontation with its nuke-rattler of a Cold War adversary; light arms for Kyiv are deemed okay, but no armed aid that may provoke “World War III". Yet, if democratic ideals of liberty are at stake here, as advertised by the West, its promotion of these values should not vary so much by a thinly veiled geo-matrix of other interests.
In the maidan of internal fissures, flickery red lines could be just as vexing. A majoritarian shift in Indian politics, for example, offers very little clarity on its limits and fallouts. Signal events such as the 1992 mob demolition of the Babri mosque in Ayodhya, with our apex court having awarded the disputed site in 2019 for a Ram temple on the basis of longer likely Hindu occupation over centuries, could yet prove less relevant to social amity than Muslim exclusion from a citizenship path in a post-ruling enactment that evoked anxiety among followers of Islam over being ‘othered’ by law, not just a social compass. Meanwhile, as ‘information asymmetry’ sets in, there’s no saying what may turn into a flashpoint. Take freedom of religious practice. Like equality, this is a right given to all Indians by the Constitution, but needs to be upheld evenly for our national bond to stay redeemable. Recent trends on this score have been dismal. In our triage of post-covid concerns, this mustn’t get lost. As in the two other fields, errors here could be costly, while red-line clarity can ease uncertainty.
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