# 25 The Intoxication of Shiva, RBI losing control?

Chaukhamba massif

The Intoxication of Shiva

After we named our son Kedar, I was drawn to the Panch Kedar, the 5 temples named after this manifestation of Shiva. The Kedar legend has it that Bhima was deeply troubled by the bloodshed of the Mahabharata wars, and sought out Shiva, to see if there was an alternate lens through which he could view the war, and lessen his guilt and pain.

Shiva told Bhima that he was too thick-headed to understand these philosophical issues , and began to evade him. Exasperated by Bhima’s persistence, Shiva fled to the Himalaya. But Bhima’s quest for meaning was relentless, and he followed the Lord Shiva into the high mountains. When Shiva realised he was being followed, he took the form of a bull. Bhima recognised him, was driven into a fury by Shiva’s refusal to engage with him, and cut him into 5 pieces. A less violent version has the bull burying himself in the soil. Either way, there were five spots dedicated to the body of this Shiva form - the hump at Kedarnath, the navel at Madhyamaheshwar, the arms and torso at Tungnath, the visage at Rudranath,, and the locks of hair at Kalpeshwar. 

I’d been to Kedarnath more than once (NL # 7), and I began my Panch Kedar circuit with a family trip to Tungnath, up a concrete trail from the meadow of Chopta, past the treeline, to a tiny temple perched on a high ledge. The pujari urged us to extend our climb by another 45 minutes, to Chandrashila, where we peered into the blue haze of a deep valley, and across, at the snows of some of  India’s highest mountains, Nanda Devi, Chaukhamba, and of course, the Kedar peak.   

On the next pilgrimage, a friend and I crossed a footbridge over the Alaknanda, and climbed through fields of ripening raamdaana, to the rock temple of Rudranath, every bit as unsculpted and unkempt as Shiva’s legendary locks. It took us another two days to climb through forests, over a pass, down into a steep valley, and up to the lonely ridge at Panar Top, already dusted with snow in late autumn. We climbed into the locked pilgrim hut by jimmying a catch in a window, and spent the night sheltered from chill winds. We were the lone group traversing the high ridge to the Rudranath temple the next morning. Sometimes the drizzle turned to a flurry of snow, and I zipped my windcheater tight against my Adam’s apple. Two hours later, the clouds were spent, and dropped into the valley. To the south, we could see the Alaknanda snaking down to its tryst with the Bhagirathi. To the north, the towering Nanda Devi, custodian of the high Himal. Some traditions hold Rudra to be the one who roars; others deem him to be the fearsome aspect of Shiva. But that day, the warm sun blessed the last hour of our walk to the temple;  for me, Rudra will always be shukra iva suryo, he who shines like the sun, a bright smiling companion on the last legs of our pilgrimage.

The walk to Madhyamaheshwar is much more domesticated, through the well-settled habitations of Ransi and Bantoli, up into a village dotted with homestays and dhabas. The handsome stone temple lies in a clearing just beyond the village, fringed by deodars, set against a towering ridge. When the evening set, we attended the tuneless aarti, waved agarbattis of artificial incense to signal our piety, and retired to a mud-floored room and hot rotis.

Come morning, we climbed the ridge, past the dwarf rhododendron, the last clumps of vegetation, where we startled a covey of munals, who fluttered into the thin air, then circled back again. It was autumn, the sun sparkled and danced off the Chaukhamba massif, and the sky was a deep blue that invited you to dive into its vastness. My companions settled into the grass, to consume their energy bars, while I explored the ridge. In a shallow pond, Chaukhamba reflected off the dark bottom. A few steps away, darkened by centuries of smoke was the tiny shrine of Buda, or old, Madhyamaheshwar. 

I bowed my head to the generations of piety that had worshipped there, and to the looming grandeur of Chaukhamba, which reared above me like a chattri. On a stone ledge, I found a tiny brass bell. I picked up, and rang it, once, twice. Then, a man possessed, I danced around the temple ringing it above my head, elated by the majesty of the setting, the towering snows of Chaukhamba.

Did Shiva sit here in contemplation of this beauty? Was he intoxicated by the beauty of creation, as I was? 

Walking home the next day, I spotted a sign painted on an old building, half-obliterated by many coats of whitewash. An arrow pointed up the trail we were now descending, to Maddmaheshwar.

Madd - intoxicated.

Maddmaheshwar, the intoxicated Lord Shiva, dancing in celebration of creation, dancing on a grassy meadow high above the world, dancing for the glorious Himalayas that are his abode.

RBI Losing Control

The US economy is running red-hot, with inflation, new jobs, and house prices all surging.

The Indian economy, in contrast, is sluggish. Employment is at an all-time low and investment is reluctant, even while price pressures build up.

The US central banker has the tools to cool the economy down, though he has to be careful that he doesn’t apply the brakes too hard. Our central bank, the RBI, is caught between fighting inflation, and stimulating the economy. I suspect it may be able to do neither.

When the pandemic hit the world in early 2020, the US Federal Reserve, or Fed, slashed interest rates, to bolster the economy. By July that year,  there was so much money sloshing around in the system that borrowers paid you next to nothing for loaning cash. “Risk-free” securities, such as US 10-year bonds, then fetched a return of only 0.5% per annum; through most of 2021, the return hovered around 1.5%. By late last year, the Fed realised that they had triggered too much demand, and inflation was beginning to hurt. In the first 4 months of 2022, the return on the same bonds has doubled, to 3.1%. When the returns on the safest investments double in weeks, money floods into them, away from riskier assets like shares. Pain in equity markets is bound to follow, as we saw last week,

The logical question now is - “How much further will central bankers tighten the market?” The most significant indicator to watch is inflation. If US bonds give a 3% return, but inflation is 7%, you’re still losing buying power when you lend your money to Uncle Sam. For sanity to be restored, bond yields should be higher than inflation. That’s going to take a great many rate hikes, unless inflation recedes sharply. The Ukraine war further gummed up the works, with huge disruptions to supply of petroleum products and agricultural commodities. Covid restrictions in China made it even stickier. Until this all untangles, prices of goods will remain elevated, central bankers will have to keep increasing interest rates, and share prices will suffer. Globally.

For Indian investors seeing their portfolios shrink, there may be some consolation in knowing that our US brethren are also getting clobbered. But if liquidity continues to ebb across the world, the impact on US and Indian economies will be quite different. Let me explore how this might play out.

1. When money gets tight, it always flows back to money centers, away from the periphery. For us, this largely means - from India, to the US. In 2022, foreign investors have sold 130,000 crores of Indian shares. That’s a lot of money - over 16 bn dollars. At this rate, we would see 50 bn dollars exit Indian shares this year. This is roughly 2% of our GDP. A developing nation needs overseas capital to boost investment, and for most of this century, foreign investors have steadily bought Indian shares. The reversal now underway means less capital for growth, which we sorely need.

2. Aside from foreign investors who buy shares in Indian companies, some set up factories and service businesses - Foreign Direct Investment, or FDI. This could also suffer, as corporate boards across the world re-examine fresh investments against a scenario of tighter capital. This will also impact growth.

1. In the dog-eat-dog world of exports, countries have often accused each other of artificially keeping their currency cheap, as this makes their goods competitive in global markets. For decades, as Chinese exports grew and grew, politicians across the globe accused China of currency manipulation. 

Inflation has turned this dynamic on its head. Political leaders fear inflation, and want to keep down the cost of imported goods, especially if they import more than they export, like India. Now, no leader wants a cheaper currency, but we may not have a choice. When foreign investors sell Indian shares they convert the rupees into US dollars to send home, driving up the dollar. At roughly 77 to the rupee, it is now at an all-time high.

The strength of the dollar makes imported goods cheaper in the US, while the corresponding weakness of the Indian rupee ships inflation into India, especially as we import the bulk of our energy, and edible oils. 

The US central bank will fight its own fight, raising interest rates, and making dollar investments more attractive. We, meanwhile, will have to deal with three major forces:

• Less foreign capital

• Higher interest rates, and

• Higher inflation.

Our central bank can tinker around, but the policy levers that move money and prices around the world are not in its hands. As long as major central banks keep tightening money supply, we will have to fall in line, or risk an even weaker rupee. It doesn’t matter whether the RBI announces policy shifts 8 hours before the Fed, or a week later. Our monetary policy - and to a large extent, our foreign exchange rates - will be subordinate to foreign hands.