The resumption of hostilities between the US and Iran has put further pressure on energy supplies

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So the world is back where it started in the US-Iran war. After a short lived ceasefire, both sides are bombing each other. The flow of crude oil is disrupted and global supply is likely to remain below demand for a long time to come, the IMF thinks.Soon after Donald Trump attacked Iran, I had written about how, in history, we find that from time to time eccentric people come to power and change the world forever by their unilateral actions. But there has never been a time when three such people were at it simultaneously.The three are Donald Trump, Xi Jinping and Vladimir Putin. These three guys don’t seem to care a fig about what they do to the world and their own countries. They are eccentric (or worse) in every sense of the word.Thus, Trump and Putin have gone to wars which they have lost but are banging on regardless. Xi has managed to unite the world against China in a way that will eventually wreck the Chinese economy. This process has already begun as the rest of the world starts to make alternative arrangements for trade and security.The silver lining is that Trump will go in January 2029 when, hopefully, America will get a president who is sane. But let that not obscure the scary fact that Trump is there for two-and-half years more. He has already created massive havoc in the 18 months he has been President. He could still, and will, do untold damage. And Xi and Putin are there for life and have the power to wreak further havoc in pursuit of their megalomaniacal agendas.Of the three, Putin is the weakest but even he is no slouch in terms of military strength. Xi and Trump have military power as well as economic strength. America is about 20 years ahead of these two in terms of technology.Wages of megalomaniaWhat we are looking at is exactly the kind of thing George Orwell had predicted in his classic book, 1984, where there are three major groups engaged in an unending fight to the finish. They just go on and on and on until no one even asks what it’s all about.None of these three has any reason whatsoever to behave in this destructive fashion. America was powerful and still is. Russia has the oil and gas that the rest of the world needs. And China controls industrial production for much of the world.The three between them had enough muscle to get whatever they wanted without going to war. Yet Russia and America have done so. China had the goodwill and money to impose its will and it’s probably only a matter of time before it tries something in Taiwan.What is different this time is that such power struggles which involved the whole world started in Europe or were started by European powers. This time around Europe is as much a victim as all others are. But the consequences are the same: global disruption, destruction and devastation. And unlike in the past since these three men aren’t fighting each other directly, and two of them are there for life, there’s no saying when all this nonsense will stop. But we can be certain about one thing: it won’t be soon.India’s problemsAnd so, as always, we come to India. Like the rest of the world we are in for a very bumpy ride economically. This could last, at the very least, until January 20, 2029. But the chances are that as America fights to retain its number one position, it will last well beyond.Therefore, it is now widely expected that world economic activity and growth will shrink. As global growth falters, it will put pressure on Indian government revenues as well which will have to continue to subsidise welfare programmes, pay wage bills and pensions and fund defence expenditure, not to mention interest on past debt. There is already the possibility of a supplementary demand for grants in the monsoon session, the first in five years.So, once the efforts at better collections from existing taxpayers reach their limits, expect higher taxes in the future. This will probably happen from 2027 onwards.I think the free ride that companies have been getting since 2018 is also getting over. Personal income taxes, too, will be revised upwards and GST exemptions, devised for political reasons, will now be revised downwards.In overall fiscal management terms governments the world over will lean towards demand management via a combination of rationing and the price mechanism. The silver lining is that our governments are masters of that art.They even excel in saying no to citizens about whether they are citizens. So I guess we will be fine.Published on July 20, 2026