Recession in India !! The Important Fact that You need to know !!

India can beat the global recession

In the previous article we have seen, what is inflation and how countries are controlling it. What is happening in the United States of America’s economy? How the US inflation affected the economy. What is the reason behind it, how are fiscal policy and monetary policies used, etc?

Here we are going to look at how India will face the Inflation that happened in US. and How it impacts the Indian economy? What is the strength of the Indian economy and what is the weakness of the Indian economy?

The US is facing a recession?

 

The United States Of America has become the largest trading partner of India and the US is facing a recession. There is no proper definition of recession.

There are two definitions we can see and the first one is  Usually, the economist says that if both quarterly GDP result of a country is negative then it is considered as the country is in recession. US GDP for the first quarter and second quarter was slightly negative; it is -1.6, and -0.6 respectively, and positive ie +3.2% in the 3rd quarter.

The second one is by the National Bureau of Economic Research which identifies recession by considering various parameters like personal income, consumption, expenditure, industry production, etc.

Similarly, multiple definitions are used by different bodies. but none of them says when it happened and when it will get over. No one can predict this. But only one way the economists closely predict the recession using the yield curve.

The consumer price index is one of the primary measures for inflation. CPI jumped to 9.1%, the highest in the last 40 years. And oil prices are going up, and GDP was negative in the first and second quarters and positive ie +3.2% in the 3rd quarter. Analyzing these things we can say the US may be hit by a recession.

How does the US recession Impact the Indian economy?

The impact of the US recession on the Indian economy is high. This happens due to the currency carry trade.

currency carry trade.

The Indian rupee is falling against the US dollar in the last few months. Now 1 USD is equal to 82 INR which is the highest in recent times.

Many foreign traders are using the currency carry trade to make money by using the interstate changes from the US and India. When the fed increases the interest rate it will be risky for them.

When the value of money goes down many foreign investors will exit from the Indian bond market again which will not good for the Indian economy.

When the INR falls against the US dollar. It will lead to importing becoming costly. This is one of the reasons the Reserve bank of India governor increases the rates to protect the INR to fall against the USD. This leads we can control the value of the currency.

Indian IT companies

The Indian IT sector contributes more than 8% of the Indian GDP. and more than 5 million direct jobs belong to this. Indian IT sector mainly depends on the US and Europe countries.

If the US facing a recession that will lead to an impact on the IT sector in India. In India, the IT sector started with layoffs. Many companies are announced that they are going to cut down some numbers of employee strength. There will be no salary hikes or fewer salary hikes will happen. This happens because of the recession.

Exports from the US

The US will be the major exporter for India and its around 16% to 18% of Indian total merchandise shipments. Shipments will be reduced due to the Recession

Did the recession start In India?

GDP Comparison

When we look at the GDP of India for the 3 quarters results are 4.1% and 13.5 %  and 6.3% respectively. By looking at the value we can take decisions like recession not yet hit the Indian economy. But we have been affected by the US economic recession.

Inflation rate

All countries are facing inflation and it leads to control in interest rates. India also facing inflation. Usually, the Indian inflation rate is around 6% but now we can see it’s around 7.41%. This may lead to a recession in near future.

Stock market downfall

The US stock market showed a negative in the financial year 2022. Major indices Dow jones is down 20% in this financial year. If the market decreased by 20% we can say it’s a bear market. Fear of recession causes recession. Coming to the Indian stock market it’s not that much decreased.

Ukraine-Russia War

Russia was the largest natural gas supplier and they reduced the natural gas supply. It leads to a supply of Cringe in the world. And the natural gas price increased and this may lead to inflation

Geo-political tensions are happening all around the world. If that happens all countries are suffering inflation.

Conclusion to recession in India

 

Recession will not be that much in India, and the impact will not be heavy and it will take time. Indian inflations are not that high compared to the US economy and Europe economies.

And the interest rates are not increased as much as the US increased. The US increased the interest rates from nearly 0 to 3% which is huge. But in India interest rate increased by 35 bps and right now it is 6.77%.

Looking at the GDP of India is still positive and not went to negative at all. And most of the companies are performing well in quarter wise. By considering these we can say India is much safer.

Everyone should be ready for a recession. Keep an emergency fund for survival at least for 6 months. Try to get passive income, if the major source of income stops this passive income help you to survive. if a recession happens these will help you to overcome it. Never try to predict the recession always try to face the recession.