Economic Crisis in the US: Big Signal for India?

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Apurva Dhamankar

6/18/20232 min read

The global economy is an intricate web of interconnectedness, and any major economic event in one country can send reverberations throughout the world. The United States, being the world's largest economy, has always been an influential player in global economic affairs. Also, it holds a significant position in shaping global economic trends.

As the US experiences an economic crisis, it sends ripples across the world, impacting various countries, including India. Since the US is one of the great superpowers, a mild or deeper recession eventually has worldwide repercussions.

The US Economy is in shambles as the US has increased the debt ceiling 78 times since 1960 resulting in complete economic disorder. A Country is set to be stable if its debt-to-GDP ratio is 77% and the US currently stands at 134%. The World is losing confidence in the US dollar the wave of De-dollarization has already started.

The US is borrowing more and more funds through Bonds from other countries, in case the US defaults the credit rating of the US decreases resulting in an increase in interest rates which will strain the government, and therefore the government will reduce its spending leading to economic recession.

A number of European bank failures, declines in several stock indices, and significant drops in the value of the Indian market were all signs of the crisis's eventual growth and spread into a global economic shock. Given the sizeable outsourcing contracts, Indian companies had with US clients, a slowdown in the US economy was undoubtedly bad news for India.

An economic crisis in the United States does hold a big signal for India, given the depth of the economic ties between the two countries. India's trade, foreign investment, remittances, financial markets, and policy responses are all areas susceptible to the impact of a US economic downturn. India should closely monitor the situation and take proactive measures to mitigate the potential adverse effects.

By diversifying trade, attracting investments from other countries, enhancing domestic consumption, and implementing prudent policies, India can strive to minimize the adverse effects and position itself for resilient and sustainable growth. Monitoring global economic trends and remaining proactive will be crucial for India to navigate through any challenges that may arise from a US economic crisis. By doing so, India can better insulate its economy and ensure sustained growth even during global economic uncertainties.

Thank you.

Regards,

Bhakti Gala,

Kautilya, IBS Mumbai.

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