Shift red lines indicate uncertain times. They may eventually achieve clarity, but cast a spell of uncertainty. As a result, not all bets need to be closed, but very few can be based on confident odds of the results. In the economics world, a red line once stopped an extended run of capital cost inversion, so that liquidity would not go into the financial loop. But over-lax policies for pandemic relief have seen central banks lend money at negative real interest rates for long periods, with lending fees below inflation, the rate at which any amount loses its real value. . The Reserve Bank of India (RBI) has kept its repo rate at 4% for almost two years, leading to a sharp rise in retail prices. It pushed the envelope in support of an economy that had hit a Covid crater. Still, while a severe income crunch might justify greater risk on inflation, it was only a test shot. On Friday, the RBI finally adopted price-control as its top priority. But, despite its outlook on inflation rising and declining output, its revised forecasts are jarring with the realities staring at our economy. Its air of reliance on price levels seems particularly odd as its broader stance has not changed and efforts to increase liquidity have been strange. In addition, its new window for banks to deposit additional funds at 3.75%, a stand-in for the mop-up of money in lieu of sovereign bonds, bolsters its troubled objective of supporting the shaking market for sovereign bonds. designed to accomplish. A fiscal expansion. If our price hike worsens, an old red line on easy money blurred by Sars-CoV-2 will have to find its solution again.
In the global theater of geopolitics, a red line was set on chemical weapons not to be used by the US in its civil war for the Iran-backed regime in Syria, only once it was overthrown. Moscow stepped in the breach, helping Tehran consolidate its West Asian influence. After that, how lightly Russia took American warnings was evident from its invasion of Ukraine. While the aggressor’s economy has been squeezed, NATO’s own red line on a direct confrontation with the Cold War adversary’s own nuclear-rattle is no less; Light weapons are considered fine for Kyiv, but no armed assistance that could provoke a “third world war”. Yet, if democratic ideals of liberty are at stake here, as advertised by the West, then the promotion of these values should not be so dissimilar to a thinly hidden geo-matrix of other interests.
In the field of internal cracks, twinkling red lines can be just as annoying. For example, majoritarian change in Indian politics provides little clarity on its limits and consequences. Incidents such as the 1992 demolition of the Babri Masjid in Ayodhya, our apex court awarding the disputed site in 2019 to a Ram temple on the grounds of centuries-long Hindu occupation, yet could not prove less relevant to social cohesion . A subsequent act of power was the exclusion of Muslims from the path of citizenship, which raised concerns among followers of Islam at being ‘injustice’ by law, and not merely a social compass. Meanwhile, as the ‘information asymmetry’ sets in, it cannot be said what may have changed in Flashpoint. Take freedom of religious practice. Like equality, it is a right given to all Indians by the Constitution, but our national bond needs to be maintained equally to remain redeemable. Recent trends on this score have been disappointing. In our times of post-Covid worries, this should not be lost. As in the other two areas, errors here can be costly, while red-line clarity can reduce uncertainty.
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