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Updated on: Tuesday, August 31, 2021, 08:48 PM IST

Raghuram Rajan on Fed’s taper tantrum; third COVID-19 wave to peak in October: Three things Teji Mandi investors should know on August 31, 2021

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Raghuram Rajan On Fed Reserve’s Taper Tantrum

Former RBI Chief Raghuram Rajan believes that slow tapering may put the US central bank behind the curve as it gradually removes the COVID-19 monetary stimulus. In a TV interview, Rajan said, “The Fed thinks it has the time to slow-walk the tightening process, given longer-term disinflationary forces”.

The US Fed Reserve Chairman Jerome Powell has been buying $120 billion/month in mortgage and treasury bonds, trying to hold down the longer-term loan rates to boost consumers’ borrowing and spending. To this, Rajan believes that a slower tightening by the Fed is a danger for the global economy as they will have to make up for a destabilising pace later. This would result in the US falling behind the curve.

The US Federal Reserve is slow-walking the tightening measures needed for the economy, argues Rajan. With a slower tightening process, the US economy is feared to slow down, posing a greater threat to the emerging markets.

India Could See A Third Wave In October

A scientist from IIT-Kanpur believes that India may see a third wave approaching in October-November if a stronger virulent spread in September. If the prediction comes out to be true, then the country may see one lakh daily cases.

Manindra Agarwal is a scientist who is also a part of the three-member expert panel that has been tasked to predict the rise in COVID-19 infections in the near future. Agarwal has predicted that only if a stronger virus mutant arrives in September, then the third wave is likely to emerge in October-November. In such a scenario, the daily cases could jump to one lakh infections. However, the Delta variant is the most infectious than any other COVID-19 mutant.

Rising vaccinations and continuous restrictions on public places have helped to contain the virus. However, the onset of the festive season remains a threat as Kerala recently saw a surge of infections post-Onam gathering.

Resilient Demand Serves India’s Growth Story

The healthy services sector, better-than-expected manufacturing activity and steady process of daily vaccinations have helped the annual economic growth outlook to remain steady.

India is on the fastest-growth despite the economic toll that hit during the second COVID-19 wave. The economic damage is less than what was predicted by the economists. The reason behind this is the resilient demand which has lessened the impact from the pandemic restrictions. Exports have shown strong demand and manufacturing activity has also risen given the surge in new orders. All of these factors combined have helped India’s economic growth story.

The hit from the first wave was more severe than the one from the second wave. Robust demand has helped sectors to survive. Moreover, the steady vaccination process has helped the economy to reopen again resulting in a further boost to all sectors.

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Published on: Tuesday, August 31, 2021, 08:48 PM IST
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