More often than not, I find myself immersed in the world of economic news and all the fascinating developments within this complex realm. As daunting as economics can be, I’ve never regretted my decision to pursue this one-sided love affair with the field. However, when it comes to writing about it, I often hesitate and chicken out, opting instead to explore and write about anything and everything else.
But today, I’m challenging myself to overcome these self-imposed fears. Here’s to stepping out of my comfort zone:
Indians Might Call Chinese Gen Z “Sanskari,” But What Do Their Economic Habits Signify?
India, once renowned as a nation of savers with coffers brimming in preparation for a rainy day, has been witnessing a shift in recent times. Historically, Indians prioritized savings—even at the expense of necessities—but this trend seems to be waning. The savings rate has fallen to 5.3% of GDP in the financial year 2023, down from 7.3% in 2022. What explains this decline? It could stem from growing optimism about rising incomes in the future or a shift in mindset that prioritises living in the present over worrying about the future.
Across the border in China, however, a contrasting trend is emerging—one that might surprise many. Chinese Gen Z is embracing frugality, a habit that gained traction during the pandemic and appears here to stay.
Young Chinese adults are spending mindfully, cutting back on non-essential expenses, and foregoing little luxuries like costly lunches. Xiaohongshu, a popular social media platform, is flooded with over 1.5 million videos on saving money and reducing expenditure. Amid an influencer-driven economy, where consumerism often reigns supreme, the Chinese youth are bucking the trend, focusing instead on long-term financial stability.
While this mindset is undoubtedly prudent on a personal level, it raises concerns for the broader economy. In the world’s second-largest economy, declining consumer spending and falling prices could have significant repercussions.
The challenge lies in finding a balance: How can an economy encourage its population to spend just enough to sustain growth while ensuring individual financial stability?
Africa’s Conundrum: Climate vs. Economy
I graduated high school in 2014, more than a decade ago. Since 6th grade, we were taught about the catastrophic effects of climate change and the looming threat it posed to our planet. Back then, we still had time to reverse some of our mistakes. Now, that window has nearly closed. Despite this, the world continues to prioritise profits over sustainability, choosing short-term gains over long-term quality of life.
In this global crisis, developed nations—the primary contributors to greenhouse gas emissions—often adopt a laissez-faire attitude, placing the burden of responsibility disproportionately on developing countries. Africa, in particular, finds itself caught in a dire predicament.
The continent’s interconnected trade routes, supply chains, and shared ecosystems mean that climate-induced disruptions in one region can trigger cascading effects across neighbouring nations. Managing these transboundary climate risks requires coordinated action, a challenge compounded by limited resources and competing priorities.
Although Africa contributes just 4% of the world’s greenhouse gas emissions, all 54 African nations have ratified the Paris Agreement, committing themselves to reducing emissions. However, this global responsibility clashes with local realities. Research shows that wealthier sub-Saharan African nations—like Nigeria and South Africa—face significant challenges in balancing climate commitments with urgent economic demands.
Nigeria and South Africa, among Africa’s more industrialized economies, are under immense pressure to expand energy access and drive industrial growth to meet their populations' needs. This creates a vicious cycle: How can these nations reduce emissions, combat extreme poverty, and achieve sustainable economic development simultaneously?
Africa’s dilemma is a stark reflection of the world’s failure to address climate change equitably. The continent, with its minimal contribution to the problem, faces some of the most severe consequences, all while grappling with the paradox of economic growth and environmental responsibility.
The question remains: Can Africa find a way to break free from this cycle, or will it continue to bear the weight of a crisis it did little to create?
Economics Can Be Noisy: The Rupee’s Downward Dog
Economics can be noisy—so noisy that even the most critical trends can get lost in translation.
Yes, I admit, I sometimes struggle with sound in general, where most things blur into indistinct noise. But this isn’t just me being dramatic. Economic noise is very real.
Economic noise, a concept introduced by economist Fischer Black, refers to all the distractions and inaccuracies that obscure true information in the market. Black defined noise as the opposite of information: it’s the hype, misleading data, flawed theories, and misconceptions that make it difficult to discern what’s real.
Black’s theory highlights a profound challenge: noise is pervasive in the economy. It clouds our understanding of markets, misguides decision-making, and complicates policy development. And often, we don’t even realize we’re being misled because distinguishing between noise and genuine information is incredibly difficult.
Take, for instance, the often-touted idea that “the rupee isn’t declining; it’s just the dollar getting stronger.” While it’s true that the U.S. dollar has been flexing its muscles, let’s not sidestep the rupee’s own downward dog.
In 2024, the Indian rupee depreciated by nearly 3%, sliding from 83.24 to a record low of 85.59 against the dollar. This wasn’t a one-time stumble; it marked the seventh consecutive year of the rupee losing ground, stretching wallets tighter and making overseas vacations even pricier.
But why the consistent slip? The Reserve Bank of India (RBI) has been loosening its grip on the rupee, allowing it to find its own (lower) level. This “calibrated move” might sound strategic, but in practical terms, it’s akin to letting the rupee take a few too many cheat days.
So, while it’s true that the dollar’s been hitting the gym, bulking up on global demand, the rupee has also been indulging in a bit too much comfort food. It’s not just about one currency overshadowing the other—it’s a classic case of “it’s not just you; it’s me too.”
Economic noise often distorts this balance, making it hard to separate signal from static. But in this case, the rupee’s reality is clear: it’s not just falling; it’s stretching the limits of its own flexibility.
That’s all folks.
I’ll hopefully be able to keep at it especially if
pushes me the way she does.
So fascinating. Please keep sharing your smarts with us!