Global Economy, Geopolitics and Impact on India

  • Global sanctions imposed in response to the invasion of Ukraine are disrupting supply chains around the world
  • Inflation in advanced economies is expected to increase
  • Data and money flows across borders are being redesigned

Inflation in advanced economies is expected to climb 2.6 percentage points to 5.7 percent in 2022, while inflation in emerging market and developing economies would rise 2.8 percentage points to 8.7 percent, according to the IMF. The Federal Reserve has boosted its benchmark interest rate this year. On its $9 trillion balance sheet, the Fed has signalled that it will begin to reduce asset holdings. Based on an assessment of the current and emerging macroeconomic environment, RBI has increased the policy repo rate under the liquidity adjustment facility (LAF) by 40 basis points (bps). The decadal trend of excess liquidity is being reversed by raising interest rates and tapering, which would have an impact on the global and Indian markets.

Global sanctions imposed in response to the invasion of Ukraine are disrupting supply chains around the world and changing global alliances in order to build new and trusted supply channels. The war in Ukraine and the greater alignment of global forces will significantly alter the trend. The interchange of energy, raw resources, industrial parts, and goods between the Western world, Asia, China, and Russia is destined to irrevocably reconfigure due to changing dynamics. When combined with the China-US trade war and other pandemic- and climate-related disruptions, the current situation is certain to accelerate corporations’ efforts to reduce their reliance on China for components and finished goods while also reducing their reliance on Russia for transportation and raw materials. The trend will lead to increased regional or localised sourcing.

Digital economy pillars are being re-embodied. Data and money flows across borders are being redesigned. On the payment side, cross-border payment infrastructure is evolving and becoming more decentralised. CBDC is being investigated by 87 countries, accounting for more than 90% of world GDP. The Electronic Currency and Secure Hardware (ECASH) Act was introduced by Stephen F. Lynch, Chairman of the Task Force on Financial Technology. The proposed legislation would enable the production of an electronic version of the US dollar for use by American citizens.

On the data front, governments around the world are becoming increasingly concerned about the use of data and are enacting rules and regulations to regulate Big Tech’s activities. The European Union and the United States have agreed to create The Digital Market Act, which will govern Big Tech. The DMA will have a big impact on European Internet players’ future. The DMA will develop business criteria for gatekeepers. The United Kingdom is developing its own data policies in the aftermath of Brexit. The Competition and Marketplaces Authority in the United Kingdom has established a specialist technology regulator, the Digital Marketplaces Unit Authority (DMU), to promote competition in digital markets for consumer advantage.

Digital economies are creating new levels of digital vulnerability. The United States, the United Kingdom, the European Union, and NATO issued united statements condemning a series of harmful cyber acts a while back. According to the statement, the PRC is behind global cyber-attacks, and its actions endanger cyberspace security, confidence, and stability. Cyber-attacks have become synonymous with national security in today’s globe. To combat the global cyber threat, the United States, the United Kingdom, and Europe are forming cyber security partnerships with allies all over the world, including ASEAN, India, Canada, and others. Cybersecurity is a critical emphasis area for the Indian economy. As part of the Quad grouping, the Indian government has committed to synergies for strengthening and resilience against cyber threats, as well as defending and insulating Indian establishment and industry from digital vulnerabilities. Indian Economy and geopolitics are set to be shaped in the long term by emerging global trend.

Staff Galactik Views

Related articles