Opinion Express View on Sensex closing at a 84,059 high: For now, a reprieve

This week has ended on a note of economic optimism, with the Sensex closing at 84,059, its highest level since October 1. The rupee has recovered to 85.5 to the US dollar, after having slid to below 86.9 on June 19. Brent crude prices, too, have softened to about $67 a barrel, after soaring to $79-plus at the start of the week. And the southwest monsoon has revived, with all-India average rainfall during June 1-27 being 10.3 per cent higher than the historical normal for this period. That’s a turnaround from the situation till June 15, when cumulative rainfall was 31 per cent below normal and 30 out of the country’s 36 meteorological subdivisions had registered deficits in excess of 15 per cent. That deficiency is now largely confined to Telangana, Andhra Pradesh, Marathwada-Vidarbha, Chhattisgarh, Bihar and the Northeast region.

To be sure, these optimistic cues are less about genuinely positive expectations of the future than relief over the worst apparently being put behind. The ceasefire between Iran and Israel since October 24 was preceded, only a day before, by the former launching missiles at a US air base in Qatar and threatening to block the Strait of Hormuz — through which a fifth of the world’s oil and a third of its liquefied natural gas flow. Those tensions have ebbed, for now. So have the uncertainties from the tariff war that US President Donald Trump unleashed in early April; they have seen some de-escalation with his administration claiming to have signed a truce deal with China. There has been a pause on the implementation of Trump’s so-called reciprocal tariffs on other countries, including India, as well. But that three-month deadline ends on July 9. Simply put, there is only a temporary reprieve from the trade policy and geopolitical strains that may come back to haunt the global economy.

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India must keep the focus on the medium term. That would mean ensuring macroeconomic stability (the best defence against short-term global financial market and commodity price volatility, linked to geopolitical events) and ease-of-doing-business reforms to leverage its strengths (favourable demographics, a large consumer base and a potential alternative for investors looking at a China-plus-one strategy of diversifying their manufacturing and supply chains). The Indian economy has so far demonstrated relative resilience, recording the highest growth among the world’s major countries amid elevated global uncertainty. But India has to do well relative to not just the world, but to the aspirations of its young population and workforce — both current and those entering over the next couple of decades. Navigating short-run geopolitical uncertainty may be easier than meeting challenges and seizing opportunities beyond the immediate term.