A Recession On The Horizon: Indian Walk With Positive Vision

The good news is the experts say there needs to be corroborating evidence to confirm that a recession is around the corner.

Global Recession fear today questions whether India is going to buck the Trend? The question explores its answer with most of the positive expectations towards the replies.

The Covid-19 pandemic forces the world’s top leaders to sit on one platform at the Swiss mountain village of Davos in the beginning of the November month. The week long agenda was to tackle global issues along with finding solutions to the challenge which is one of the world’s most threatening issues.

Looking at the fears on the global economy atmosphere, threats are there displaying the advent of an oncoming recession which is topping the worry list of the world’s leaders responsible for business and government globally.

Just one year ahead of us, says the fear of the economists – ‘it is too close now’. They say that a recession could occur in 2023. This might happen particularly if the Fed’s interest rate goes up stifle demand from people and businesses, or otherwise if the inflation strategy falls flat.

Before the recession, the depression has its bigger sound around. People are pessimistic also after Elon Musk stated recently that he thought the world is already in a recession. He says, the situation may worsen over the course of the next one and a half years.

Just a single opinion cannot display the real picture. Until the majority of the global financial experts say the same, a few such speculations cannot be taken for granted.

There is also the division of opinions on this question. On one hand the economists warn of a recession, the bulls dismiss the fear calling it exaggeration.

Talk about stock experts, market seems to be riding a potential 832% growth opportunity by the year 2030. This is also true that today, very few people are aware of this opportunity. If the mainstream media gets the whiff of it, the stock can go to the topmost height with its full potential.

The seasoned investors know, markets are having the forward looking growth whereas economic data looks backward looking, though in the month of October 2022 markets worldwide had tumbled. Then the Dow Jones Index has gone down around 9 per cent low while the BSE Sensex also has lost around 11 per cent over the last month.

The markets also seem hinting us something about the looming recession. We know, recession is almost the king of bad times, otherwise defining a global recession is not an easy task.

The economists define a recession, in technical terms, as two consecutive quarters of contraction in the GDP (gross domestic product). These periods are known by lower income of people, unemployment growth, fall in production and also drop in retail sales.

The NBER (National Bureau of Economic Research) can be seen as the authority over the knowledge. It is also recognized as the authority which defines the starting and ending dates of recessions in America.

The research projected by the National Bureau of Economic Research  says in the last seventy seven years from 1945 to 2009, the recession as an average has lasted for 11 months. The most recent is the Covid-19 recession which began two years back in the month of February 2020 lasting only for 2 months. And this was also the shortest U.S. recession in history.

Though economic recessions usually are portrayed as short-term events, but the consequences of high unemployment, decreasing incomes, and reduced economic activity might have lasting consequences towards the economy and for peoples’ economic situations.

Inflation is Everywhere now a days and Americans are feeling  burdened with inflation. And this is what makes economists wonder whether that means a recession is on its way.

Now the question is, will India be able to avoid a recession?

As per the Moody’s Investors Service, India’s economic growth projection has been slashed to 8.8% for 2022 from 9.1% earlier, due to high inflation.

The current geopolitical developments speculates a global slowdown in exports with tightening of central banks’ fiscal policy. Simultaneously it is also expected that India might see an economic slowdown during the medium term.

Rising crude oil, food and fertilizer prices will weigh on household finances and spending in the months ahead.

RBI’s increased rates for stopping inflation will compel the economy to slow down. Nevertheless, India’s underlying economic fundamentals are more strong than other countries and even after the short-term turbulence, the impact on the long-term outlook in India will be marginal.

The results of schemes and reforms are expected to show up in the latter half of 2022. These will be like production-linked incentives and government’s Atmanirbhar Bharat (self-reliant India), etc.

Resultantly this is going to lead to higher employment, increased spending and increased production. Thus this  should balance out the slowdown and give a kick start to the economic growth.

India is trying hard to clock $350bn worth of services exports during the 2022-23 which will be a growth of 40% over the previous fiscal year. The reason being, the key sectors including hospitality, entertainment and travel are set to post swift recovery post pandemic.

With the manufacture opting for moving out of China, India is all set to grab the opportunity, capitalising on it.

The grand good news is that the Indian manufacturing sector witnessed a 460% jump in the year 2021-22 as against 2019-20 with new investment announcements which are made by the private sector increasing by one hundred and fifty per cent during the same period in comparison to the previous financial year.

Global good news for India is that the country has emerged as a preferred investment destination. The evidence is shown out of the fact that India has recorded highest ever annual Foreign Direct Investment (FDI) inflow which is 83.57 billion US dollars during the last fiscal year.

This probably is going to be enhanced even further due to the geopolitical crisis out of the Russia-Ukraine war.

From the domestic financial arena good news reveals that the financial system in India has become more resilient now with bad debts of banks having been cleaned up.  Thanks to digitalization, Indian economy is expected to get more formalised which in response are going to give the government more tax-raising clout.

Most importantly most of India’s sovereign debt is domestically owned thus protecting the country from the risk of defaults and or a complete sovereign debt crisis. That is something several developing economies could encounter in the months and years to come.