Why would this happen in a developed economy which would have the capacity to attract the best and the most to work. Was this the Brexit effect, Covid effect or Ukraine-Russia war effect? The correct answer is none of the above. The real culprit was the furlough scheme introduced by the UK Government to protect its citizens and economy from the disruption that Covid had unleashed. At that time, it was hailed as the forward-looking policy initiative by rich western nations to put more money into the bank accounts of its people when their economies were locked down. What could happen to any one of us if someone simply keeps transferring money every month to our bank account when we are sitting at home. Simply, we’ll start believing that either we are entitled to it or if nothing else then making a living is not my responsibility but that of the government of the day.
2022 has been quite an eventful year. It has been the post covid year for the world other than China, it saw emergence of the biggest military conflict post the second world war and the levels of inflation hitting the developed western world not seen in the last 40 years. It was argued that the high inflation has been the result of the supply chain bottlenecks caused by Covid and then accentuated by the spike in the oil and food prices triggered by the war. It was expected therefore to last only a couple of quarters till the supply chain opens up and oil/food prices settle down. However, economists are now coming to terms to accept that the higher levels of inflation are going to last a couple of years if not more because there is something structurally which has gone wrong. And what could that be? The expansionary monetary policy of the western central banks to put money in the hands of its people single handedly pulled down the productivity of their societies. Thanks to the locked down, living expenses had come down and thanks to the largesse of the governments the bank balance was going up. Add to that the flexibility offered by the employers to work from anywhere and not just home structurally altered the effort to reward ratio in people’s mind. Complacency was the natural outcome which got manifested in the Great Resignation as the importance of having a job to pay your bills simply diminished. The aspiration and hunger of the society therefore was fundamentally impaired. Simple economics tells us that when too much money is floating around and starts chasing falling productivity inflation can be the only outcome. In other words when number of people idling in a society are more than those who are working the cost of production goes up and so does the prices of goods and services. When this imbalance is caused by tactical reasons inflation is short lived. However, when this is caused by change in habits it could be a longer-term cost which the society would have to incur.
We all have grown up hearing that there are no free lunches and the trajectory of the world economy that we have witnessed in 2022 is a living case study of the same. Developed economies are paying for the lunch which they thought was free. Indian economy on the contrary is now being recognized by the global community for its resilience. That could happen simply because Indian government didn’t have the luxury of giving free money to its citizens and Indians had to work harder than normal during lockdown times since it was truly a case of survival of the fittest. Most Indian businesses whether big or small were able to become fitter and efficient during crunch times which contributed towards improved earnings growth in 2022 on a normalized base of 2021. The resilience of Indians really and truly is the incredible India story which is now becoming an India opportunity not just for Indians but for the world. Hard work may not be the shortest but is the surest way to success.
Friends, amongst various life lessons that 2022 has gifted us one of the most defining ones could be that doing is living. To realize our dreams, we have to do two things – first dream and second do everything needed to convert it into reality. We all get the lives that we deserve and not what our benefactor has thought for us.
On this note allow me to wish you a relaxed closure and the very best last days of 2022 around your loved ones. Thank you for your love, blessings, friendship and mindshare through the year and more importantly thank you for being around.
Signing off for 2022 with my warmest wishes, love and affection for a wonderful 2023.