There’s a common question that is dominating the minds of analysts, investors, policymakers and economists across the globe. It is: Will the world slip into a sustained recession?
Inflation has remained at persistently high levels in most countries, making getting by get harder. The prevailing geopolitical tensions haven't helped matters for policymakers and currency administrators.
Battling Inflation, Recession
To tame the runaway price line, the go-to default instrument – from Bidenomics in the US to Rishinomics in the UK – has been strikingly similar, if not identical, which is to raise interest rates and ease out monetary and fiscal support.
These have come about with almost textbook synchronicity. These attempts to arrest the slide and engineer a rebound haven’t come easy. This has called for piloting the policies through a very slender track that seeks goals, which can sometimes pull in opposite directions.
Continuous rise in interest rates over a long period of time to cool prices can hammer down people’s purchasing power. The consequences of this for the broader economy can be adverse.
As a result, the global economy is in the midst of one of the most internationally synchronous episodes, where rising interest rates to contain inflation is eroding people’s buying power. It also raises borrowing costs for corporations, prompting rethink on investment plans.
Gratitude To Air India
This can cascade through the broader economy, militating against the goals of creating employment and raising people’s income. This is why Air India’s decision to place huge plane buying orders with Airbus and Boeing has triggered a collective sense of relief as well euphoria.
Air India’s announcement that it will place a mega 250-aircraft order with the UK facilities of Airbus and Rolls-Royce, was followed shortly by the announcement of a 220-plane order with US aerospace giant Boeing.
The Boeing and Airbus deals, combined, is the largest order by any airline as Air India prepares to revamp itself under the Tata Group with a fuel-efficient fleet.
Under the deals, the Tata Group-controlled airline will purchase 190 narrow-body 737 MAX jets and 30 wide bodies – 20 of them Boeing 787s and 10 Boeing 777Xs. It will also acquire 210 single-aisle A320neos and 40 widebody A350s, with the latter to be powered by Rolls-Royce engines.
US President Joe Biden told PM Narendra Modi over a phone call on Tuesday that the agreement will raise employment across the United States. “This purchase will support over one million American jobs across 44 states, and many will not require a four-year college degree,” said Biden.
UK Prime Minister Rishi Sunak had echoed similar views. “It will create better-paid jobs and new opportunities in manufacturing hubs from Derby to Wales, so we can grow the economy and support our agenda to level up – helping to deliver on my five priorities for the country.”
World Economy Needs India
The key words in both Biden and Sunak’s statement were “jobs” and “employment”. Creating employment and opportunities for the armies of youth joining the queue of hopefuls has remained, and continues to remain, the final frontier for any administration.
Employment opportunities are one of the most visible metrics to gauge an economy’s health and the level of activity in the wider business landscape.
The sense of excitement that Air India’s Boeing and Airbus orders have triggered in the US and the UK draws from the expectation of multiplier effects that these will likely trigger.
The aviation industry had been one of the pandemic’s worst sufferers, and therefore, such an order is seen as nothing short of a stimulus. Importantly, it is about creating jobs in the manufacturing sector, the delivery pipeline of which will likely spread over several years.
Besides creating jobs in the US and Europe, the Air India orders with Boeing and Airbus reinforces another hypothesis. India remains a symbol of hope to turn the world economy around. From the days of protesting jobs being taken out from the US to offshore centres in India about 15 years ago to now cheering an order by an Indian company to create jobs in America and Europe, the axis of economic might seems to have decisively turned.
Gaurav Choudhury is consulting editor, NW18. Views are personal and do not represent the stand of this publication.
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