Global Recession 2023- What is its impact on India?
In an interview with NDTV, Neelkanth Mishra, Chief Economist for Axis Bank, discussed the potential impact of a deep recession in the United States on India and the global economy. Despite initial hopes of a “soft landing,” Mishra pointed out that the US fiscal deficit had surged to $2 trillion, potentially preventing a recession. However, this high deficit could lead to rising interest rates and reduced global demand, possibly resulting in a severe recession.
Mishra highlighted four pathways through which this recession could affect India:
Services Sector: India’s IT and business services exports, constituting 10% of the country’s exports, might suffer, slowing down services growth.
Goods Exports: Falling demand for goods globally could impact India’s goods exports.
Dumping of Products: If India remains a strong market, manufacturers may flood it with products, harming Indian producers.
Bond Market and Equity Markets: A US recession could affect yields on government bonds, leading to increased volatility in financial markets.
Regarding steps India should take, Mishra emphasized macroeconomic stability over risk-taking to navigate economic turbulence successfully. He also downplayed the immediate impact of central government changes on the economy, highlighting the role of state governments in short-term economic momentum.
Mishra suggested that the middle class prepare for global economic turbulence in the next 1-5 years but expressed optimism about India’s economic trajectory in the long term, advising caution rather than alarm.
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