Story Of The Week

Are we ‘Reset’ for the ‘Global Reset’

Written by – Mr R K Anand

former Chief Economist, Punjab National Bank

& Member IBA Monetary Policy Group

In the basics of ‘Economics’, we learn ‘ceteris paribus’ meaning thereby ‘other things remaining the same’. The forefathers of the subjects evolved their theories and models on the foundations set by this term.

Today’s global environment presents a scenario in which every element of the economies be it domestic or global is moving with high ‘Beta’. In other words, worldwide macros present higher uncertainty and volatility. The global financial & commodity scenario presents new highs for the crude and USD.

We all were crisscrossing in LPG conundrum i.e. liberalization, privatization & globalization before the recent global headwinds of protectionism, global trade restrictions, tariffs, currency wars and crude price shocks.

LPG

Source: daytodaygk.com

INR which found its orbit of exchange rate around INR 68 for a fairly long time and stable revolution saw upward pressures towards INR 75 & even beyond. Brent crude market is talking of estimates around $ 100 pbd (per barrel dollar) against the street’s perception around $ 75 pbd.   In fact, oil prices have increased by 50% since a year ago. Combined with this, USA fired its self-propelled single engine for its economic growth with an increase in US Fed rate and also challenging China the second largest economy of the world with trade sanctions and tariffs.

As an outcome of these dynamic elements, Global Economy may see Reset i.e. terms of trade among the major economies are seen to get reset at new levels. Balance of trade and also the terms for global E-commerce market is seen to undergo change. The entities like Amazon are seen to face new taxes coming their way combined with a change in terms of trade.

High crude price, depreciating rupee & adverse terms of trade will reset the economic scenario for India of upward pressure on current account deficit. And the same is seen true about many emerging economies. Globally the scene is getting set dichotomized between advanced economies and emerging economies. Simultaneously, the global economies are seen to rearranged in a new trading group based on economies of trade and currency costs.

Where is this heading towards? The economic sense of matter throws signals of ‘back to basics’ guiding the global economies to ‘produce, grow & trade more the products and services’ wherein there are ‘economies of input, labour & capital’ meaning thereby banking upon their exportable surplus for the international trade. For instance, vast agrarian landscape, large rural workforce and labour intensive production model throws signals of strengthening ‘Bharat’ for the positive balance of trade.

images

Source: victuruslibertas.com

New trade partners may thus be seen e.g. India, China and Japan are seen setting the tone of a new order of international trade. This may cause a directional change in the trade winds to increase East – East global trade challenging the present West-East & West-West scenario. Some of the global players may be thinking of resetting of pricing of trade on the Barter System of Trade due to unpredictability and unrealistic valuation of global currencies. The examples can be many like farm produce for oil or defence equipment for something else wherein the exporting country has economies of scale.

We reach now at our moot point? Are we reset for the so-called global-reset? Few corollaries of the same are imagined below:

o  For work and life to be lived with Eastern economies e.g. Japan & China & other partners in BRICS rather than the presently more with Western work & business offerings.

o  India likely to offer more as well as new work profile in ‘Bharat’ and the need to know that more in depth and clarity. The nature and dynamics of work and life there call for our resetting in those roles.

o  India offering more scope in a self-employed and self-engaged entrepreneur in Farm & MSME sector in contrast to white collar jobs in posh cities.

o  Brownfield projects offer more jobs rather than Greenfield ones for some more time since the debt de-burdening and management of NPAs in banks is in progress.

o  Mergers, Acquisitions & Takeover specialists are likely to be in more demand rather than specialists for setting up the new projects.

o  Financial sector may become more demanding on the skills of managing market risk, hedging, insurance & volatility.

o  Start-ups may also face challenges of finance from the angel investors and large corporates face private equity, venture capitalists and the like.

o  Market may be depending more and more on artificial intelligence (AI), data analytics and digital database market research for their business decisions.

o  Energy & fuel sector may make roadways into renewable sources of energy bidding away some market share out of crude.

o  Banking sector is shaping in its new avatar of four-five big banks surrounded by a variety and a huge number of small, payment & digital banking outlets. Bio-metrics may change the colour of life for the bankers as well as the customers.

o  Defence, Water, Road & Air Transport, Logistics and Farm-preneur offering more jobs than typical BFSI, Consultancy, Engineering & Marketing.

o  Agribusiness is seen to form a bigger share of the total business compared to what it is at present.

The Reset: Nothing above is beyond the imagination rather the shape is getting evolved to give way to its foundations in all the probable listed above. The question now is for an individual professional i.e.  What needs to be done to fit in these roles. It’s the base question asking for directional change rather than fearing or becoming cynical of the career lying on the road ahead.

The solution is to understand the basics of the emerging scenario, sectors and services. The icing on the cake is not important rather the cake itself is required to have the desired contents. Application of ‘basics’ of the business to the analysis of recent market events is the key to get reset in the new role. Academics need to be mingled well with the applied side to produce value candidates. The directional change required in the course of action is: to move towards ‘understanding the event’ i.e. comprehension & analytical ability and develop the skill to apply the solution i.e. after learning it out of interface with the real market. We may see precedence of ‘skill with knowledge’ over ‘only knowledge’.

ARE WE ‘READY’.

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