Billionaire banker Uday Kotak has cited a bumpy ride ahead for the Indian economy amid the rising cases of Covid-19. India is currently grappling with the surging third wave of the COVID-19 pandemic driven by the new Omicron variant. New restrictions on mobility have been imposed across the country as cases rise which in turn has considerably impacted economic activities.
Uday Kotak, the CEO of Kotak Mahindra Bank, in a tweet, has predicted a chilling possibility through a question. He has spoken about unexpected outcomes of COVID-19 and their impact on economy.
“Unexpected outcome of Covid is sustained supply shortages. As inflation becomes structural from transitory, central banks worldwide may huff and puff catching up. Inflation has implications for Governments too. Omicron may delay it, but is ‘goldilocks’ of low interest rates over?” Kotak tweeted.
https://twitter.com/udaykotak/status/1482200669604179971
What Kotak is pointing at is the soaring inflation across economies and supply chain disruptions. This will result in the end of the ‘goldilocks’ phase of the Indian economy.
‘Goldilocks’ is a word derived from a children’s tale ‘Goldilocks and the Three Bears.’ In the financial vocabulary, ‘goldilocks’ is used to represent an economy that is in the ideal state, including a high growth rate and low-interest rate.
To maintain this ideal ‘goldilocks’ state of the economy, the government needs to inject money into various infrastructural projects and devise favourable tax policies. However, this may only work if central banks update their monetary policies and align them with the upward momentum of the economy.
Earlier this month, Kotak had advised governments not to resort to printing more money as a way out when economies are suffering due to Omicron outbreaks. “60% of world reserves in US $. An exceptional privilege that allows US to be liberal ( reckless?)with printing money, fiscal and current account deficit, military spending. As the quote goes: “do as I say not as I do”. Other countries better not try walking in US shoes!” he wrote
https://twitter.com/udaykotak/status/1477834820222795777
Due to the COVID-19 pandemic, the Indian economy is witnessing turbulent times and the current Omicron lead wave has further deteriorated the situation.
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