By Ruma Dubey

Today, in India we finish one month of the great demonetization drive and while the Finance Minister came on TV and announced a few discounts on purchase of fuel, suburband railway passes; the fact remains that the Parliament is caught in a logjam and with a fruitful debate, this needs to be broken. The TV channels, their anchors and panels are shouting each other down but we need to look beyond what is happening on our shores alone. We are going through the effects of demonetization and will do so for a quarter or two more but after that, we will need to take out heads out from the ground and look around at the world, right? And that is what we are doing right now, looking at another major development and this time in Europe.

The last European Central Bank (ECB) meet of 2016 happened today and the chief, Mario Draghi has too much running on his shoulders – to help Europe tide over to good times, with the help of an extended quantitative easing (QE). For months, there was a question mark over what Draghi would do about the ECB’s €1.7 trillion bond-purchase program; this was scheduled to get over in March 2017. And today’s meet was less about interest rates and more about answers to pertinent questions like whether the ECB will extend this QE further, whether Draghi will signal when the tapering off would begin and whether he will gradually bring down the amount of QE?

And his policy statement answered most of the questions. First things first, the interest rate was held steady – no changes there. On the bond buying program – it is now to be extended at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary.

Draghi has most certainly struck a fine balance – he extended the QE for a much longer period than expected and at the same time, brought it down by €20 billion per month – it will be €60 billion from April’17, down from €80 billion till end of March’17. At the same time, the answer which we did not get was when the tapering would happen. Given the huge amount of political uncertainty expected in Europe next year with Germany, Italy, France and Netherlands going to polls, surely he might not want to rock the boat now. He did the right thing or else we could have seen a selloff in the bond markets; he sent the right signal suggesting that bond purchases might slow later in 2017, once the laid out economic conditions are met.

Highlights of the ECB statement:

• Interest rate on the main refinancing operations, on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively.
• It expects the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.
• To continue its purchases under the asset purchase programme (APP) at the current monthly pace of €80 billion until the end of March 2017.
• From April 2017, the net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary.
• If, in the meantime, the outlook becomes less favourable or if financial conditions become inconsistent with further progress towards a sustained adjustment of the path of inflation, the Governing Council intends to increase the programme in terms of size and/or duration.
• Parameters of asset purchase program changed.

Will this have a direct impact on the Indian markets? It could if sentiments remain buoyant in global markets, the same way it did today. Improvement in demand from Europe spells good news for India and with demand slow in the domestic market, this is a positive happening for India.

Today we know that the demonetization was more about going cashless and digital than about black money or terrorism. Going digital is a good thing in the long run because eventually those two evils– black money and terrorism are what we can weed out.

As things toughen for Indian Inc in Q3 and Q4, maybe its prudent to look towards Europe and USA for positive cues; after all staying positive is what makes life worth living.