Rising Cost of Living

AS the Ukraine war drags on, the world economy threatens to go into a tailspin. Already, some major western economies are threatening to go into recession. Some are already said to be in a technical recession. The US economy, world’s biggest, also shrank through the April to June quarter. Inflation has raised the cost of living while incomes for the middle class and the lower classes haven’t risen correspondingly.

The IMF has already said that the impact of the Russia-Ukraine war, tightening monetary conditions worldwide, the greatest inflation in decades, and the lingering effects of the pandemic will cause a general slowdown across the world, including India, in the upcoming year. India’s growth has been projected to decline to 6.8 percent after registering a healthy increase of 8.7 percent in the last fiscal year.  The IMF’s dismal growth forecast for the Indian economy is not a good news after a year of healthy growth. For two years after the advent of Covid-19 pandemic, Indian economy performed well below even some sub-saharan countries.

Ukraine war has been the single-most factor for the current setback to the global economy. In today’s globalized world, events in one part of the world trigger far-reaching fallout in other parts. There have been foodgrain and fuel shortages which have driven up prices and this has been a matter of great concern for developing countries.

A slowing US economy will have far-reaching effects on the world. And this is happening at a time when the global economy was gradually recovering from the debilitating fallout of the Covid-19 pandemic, a once-in-a-century event. The countries were opening up and letting the economy function normally. International travel has also returned to pre-pandemic levels. But Ukraine war threatens to undo the progress.

The situation is unlikely to change for the better unless the war draws to an end. And this looks unlikely to happen anytime soon. The US-led western military alliance NATO has so far ensured that Ukraine forces put up tough resistance to the advancing Russian army. The US and major European countries have supplied Ukraine with generous military aid to better defend itself against Russian aggression. The West has also got Russia’s neighbours like Finland and Sweden to join NATO.  The development has further riled Russia which opposes the expansion of NATO right up to its borders, a position that became the trigger for its invasion of Ukraine.  But if the world economy is to get back on track, the war has to end. And to this end, the major powers need to work towards a negotiated solution to the crisis.