Sedwill believes India is well-placed to benefit from the current shift in global trade and manufacturing. As China’s economy slows, with rising labour costs and an ageing population, companies are moving production to other regions.
India, along with ASEAN countries, is emerging as a strong alternative. “There are natural economic reasons for production to move offshore from China… But of course, there are political reasons as well,” he explained.He emphasised that India’s size and growing economic importance make it hard for global powers to pressure it into choosing sides. “India is too important a country to essentially have to buckle to that kind of pressure,” he said. Interestingly, even Chinese firms are moving operations to India and Southeast Asia for cost and market reasons.
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Sedwill, believes that inflation is more likely to be the global scenario in the coming years. He noted that while there could be some pockets or regions experiencing disinflation due to shifts in supply chains, the overall inflationary pressures remain strong.
He pointed out that global supply chains, as seen during the COVID-19 pandemic, can lead to monopolies, particularly in essential raw materials and other everyday goods. “There are other monopolies in different parts of the supply chains,” he said, “and countries are increasingly looking to onshore, reshore, or near shore production to create economic resilience, which often results in higher costs, driving inflation.”
He also highlighted that tariffs and protectionism are adding to inflationary pressures, particularly with the growing tensions between the US, the EU, and China, and even the US-India relationship.
He further added that large deficits contribute to inflation by driving up interest rates. He explained, “The up arrows, if you like, overall outweigh the down arrows, and we are probably in a period of structurally higher inflation than we have been, really since the financial crisis.” However, he acknowledged that some countries might experience a different trend, with inflation moving in the opposite direction.
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On the topic of de-dollarisation, Sedwill noted that while there is some movement away from the US dollar, there is no immediate alternative currency on the horizon.
He explained, “The Renminbi isn’t convertible, so it isn’t even a possibility. The Euro has never really achieved the status of a global reserve currency.” He added that some oil transactions are already being made in currencies other than the US dollar.
While de-dollarisation is occurring at a small scale, Sedwill warned that it could erode some of the US’s advantages as the global reserve currency. He said, “The risk for the United States is that they may lose some of the benefits of being the reserve currency if de-dollarisation continues, even at the margin.”
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