Business reporter Anuj Mishra asked questions to which Hiren Gandhi provided a clear and fact-based analysis of the current global economic situation. The liquidity supplied by central banks worldwide has increased significantly, causing both bullish trends and instability in global markets. Below are the responses to these questions:
Increase in Liquidity in the Global Economy and Its Impact
Liquidity in the global economy is rising because central banks like the US Fed, ECB, and Japan have cut policy rates and increased money supply. In the first quarter of 2025, cross-border bank credit increased by $1.5 trillion, especially to non-bank financial institutions. This increase happened at rates between 5% to 10% in Dollar, Euro, and Yen. Overall, global liquidity has reached up to 38% of GDP, driven by bonds and loans.
How Much More Currency is Being Printed?
Central banks are printing money through Quantitative Easing (QE), but mostly Quantitative Tightening (QT) is ongoing in 2025. The US Fed’s balance sheet stands at $6.6 trillion, down from the QE peak. Globally, new money through QE reached $9 trillion, but in 2025-26, the increase will be around $500 billion. This is not printing but an increase in reserves to stimulate the economy.
What is Its Impact?
This increased liquidity boosts the economy: investments rise, stock markets go up, and growth reaches up to 3%. However, it also causes higher inflation (2.5% to 3% in the US), asset bubbles (like AI stocks), and higher volatility. In the long run, debt wall refinancing (2025-28) may cause a crunch reducing growth by 1%.
Did Japan Change Bond Interest Rates?
Yes, Japan increased bond interest rates in 2025. The 10-year JGB yield reached 1.82%, and the 30-year reached 3.32%, the highest since 2008. This caused the Yen to weaken, inflation rose to 3%, and the BOJ policy rate was raised to 0.5%. This happened due to financial health concerns and stimulus packages, causing instability in the bond market.
How is China Stimulating USD Debt?
China is handling USD debt by issuing new debt worth 12 trillion Yuan ($1.67 trillion) – treasury bonds, local special bonds, and off-budget debt. In 2025, the budget deficit reached 4% of GDP, with 1.3 trillion Yuan in ultra-long treasury bonds and 4.4 trillion in local special debt. This supports infrastructure, consumer subsidies, and local government debt relief, refinancing USD debt and maintaining 5% growth.
What is Its Impact on the Global Economy?
China’s stimulus pushes growth up to 4.8%, mostly on infrastructure rather than consumption. This does not increase global demand but adds overcapacity and deflation. US-China trade war tariffs increase, reducing growth by 0.7% and inflation to 2.6%. Exports in Asia rise, but overall growth remains 3% – no surge in global demand.
Is the Stock Market More Liquid and Volatile than the Share Market?
Stock market and share market are the same – buying and selling of shares. But if you compare major stock markets (like NYSE) and local share markets (like BSE), then yes, global major stock markets are more liquid due to higher volume and traders, and more volatile because of global events (like AI hype) causing price swings. S&P 500 volatility is 1.13%, higher than since 1980.
Will the AI Bubble Burst?
Yes, many experts say the AI bubble will burst in 2025-26. Companies like OpenAI are spending $500 billion but revenue is $13 billion – a loss of $11 billion. Nvidia stocks rose due to GPU shortage, but supply will increase in 2025. IMF says this is like the dot-com era – capital expenditure up to $500 billion but low ROI. Capital Economics predicts S&P may reach 6500 before crashing.
Will There Be a Recession and Inflation in 2026?
Yes, there is a 39-50% chance of recession in 2026, especially in the US – due to tariffs and inflation reaching 3.3%. Deloitte predicts recession in Q4 2026, with GDP at 1.7%. Inflation will be 2.6%, rising due to tariffs. Global growth will be 3.2%, but stagflation due to US-China war.
Why Is India Safe During Global Recession?
India is less affected by global recession because exports are only 21% of GDP (global average 29%), so domestic demand is strong. Diversified exports (more with Asia), young population (67% aged 15-64), and being an oil importer benefits from falling crude prices. GDP is expected to grow 6.5%, while global growth is 3%. Forex reserves and low external debt (3.9% of GDP) provide safety.
What Impact Does India Face and Why Is It Less?
Exports may fall 15%, FDI decreases, and the rupee is volatile (at 87.82). But effects are less due to domestic demand over 60% of GDP, inflation below 3%, and strong labor market (unemployment 4.6%). India grew 6.7% during 2008 crisis as well. Decoupling from global shocks is evident.
What Preparations is the Government Making?
The government is supporting MSMEs (infrastructure, skill development), giving tax cuts (middle class), and stimulus by maintaining budget deficit at 4%. RBI has cut rates to 5.5%, controlling inflation, and improving ease of doing business for FDI. Labor reforms, digital governance, and climate policies increase resilience. Structural reforms aim for 8% growth by 2047.
All these factors show global economic uncertainty, but India remains strong.
| Market | Current Status and Trends | Forecast and Risks |
|---|---|---|
| Gold | After record above $4,000 in Nov 2025, correction phase | Outlook $4,200-$5,600 in 2026, supported by inflation and rate cuts |
| Silver | Consolidation between $46-$51, rising industrial demand (solar, EV) | Bullish 2025-2030 but risky levels |
| Stock Market (S&P 500) | Volatility 1.13%, adjustments due to AI hype and recession risks | Expected 3.2% growth in 2026 |
| Cryptocurrency | Neutral-optimistic, Bitcoin expected $85,000-$100,000 in 2025 | Bullish due to ETF and adoption, but higher volatility in tokens like DOGE and XRP |
Secretary — InGlobal Business Foundation (IBF)
Director — ReNis Agro International LLP, Ahmedabad, India
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