Leadership guided Macro-economic Adjustments
By: Amit Bhushan Date: 2nd April 2018
With the ‘retaliation’ on the ‘Trade-front’ by China, the ‘Leadership guided Macro-economic Adjustments’ or what’s also dubbed as ‘Trade War’, seems to be finally on’. The ‘initial shots’ seem to be interesting directions setting in, although no one’s sure till what time such directions hold or if these directions are the right ones. However to begin with, what it seems is that the USA would attempt to rejuvenate its basic industries like metal refining which form the core of manufacturing and presently dominated by the Chinese. The ‘moves’ in this direction has prompted the Chinese to reverse some of the ‘trade concessions’ to sectors on which its dependency is low or areas where a shift of trade away from the US imports may yield some gains. Next step most likely is around ring-fencing of the ‘innovation industries’ facing what’s ‘blamed’ as some sort of discriminatory or unfair treatment and this is likely to be a pain area for not only China but also some of the European and other countries including India. While Bollywood or even Bengaluru could end up as possible beneficiaries of some of the likely counter-measures as some demand is sought to be shifted but that doesn’t seem to be of any priority for the Netas. Please note that this is likely on-account of lower costs and a comparatively better ecosystem for the same with a rather limited current market-share, however it would still require quite an overhaul of how the innovation is perceived/conceptualized, nurtured/developed/evolved and delivered. And this is so in spite of the rough and tumble of elections which seem to be growing rougher by the day or with even our own noise around trade-imbalances. The fact is that the Netas in India would prefer to discuss new bans for movies, books etc. or continue to persist with old discussions regards Caste or Religion while giving the new ideas and development, a total miss. All this while the Netas now also seem to be hard-pressed for being depicted (in media) on the Right-side of the 'Game' which they would swear that can't be alineated with, in politics. This is because of the Internationalization of the Macro-adjustments with trade-leading countries now in-charge and seized with the issue and its impact on nearly all others.
There is likely to be shift in ‘source of origin’ for the goods and services for consumption in various countries. Also, a shift of the associated production machinery alongside new infra coming up and this is likely in line with areas that are perceived as lower risk for putting out such machinery in the ‘new emerging trade order’. Of course the nation states would continue with their tussle for a perceived greater influence in the overall world order, but the overall impact is likely to be a more even production of goods and services which remain concentrated in a few geographies today. The business tussle over ownership/ management control of the assets ‘shifting away’ from present locations and the terms of such trade especially in the ‘emerging economies’ would be a key factor to watch. Of course, the health of the politico-strategic relations would also continue to have some bearing, but not much especially if the displacement is perceived to be wide-spread. There isn’t any new restrictions on the Capital flows for now and imposing them is also not only difficult but also perceived to be highly risky. This should support continued ‘free movement’ of the risk capital as well as some forms of debt, though the cost of it may go up in times to come. The corporate management either globalizing freely would be constrained to rethink around how they want to address market opportunities with a harder look at ‘trends’ in risks as well as costs & returns. Also, many areas where project developers were treading into, to diversify and become owners will also be in need for a re-look as businesses will need to rethink how they want to be invested for the given situation. While the situation may be perceived as a bit fluid, however the emerging markets which are rather rich in primary resource and high on consumption, may have a potentially better negotiating power especially if they are playing their Game’ well. Let the ‘Game’ evolve…..