How is India safe from the recession?

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Apurva Dhamankar

7/2/20232 min read

At the beginning of 2023, IMF Chief Kristalina Georgieva said that they think one-third of the world's economy will go through a recession this year. The rate of economic expansion will be lower than it was last year. The motivation behind why the world's development is easing back is that significant economies across the globe are encountering a decrease in development. The global economy appears to be close to entering a recession, as signs of slower growth are evident in the United States, China, and Europe—three of the largest economies in the world. In 2023 and 2024, the World Bank projects that the global economy will grow by 1.7% and 2.7%, respectively.

India, according to reports, has a low risk of experiencing a recession. Research by Bloomberg suggests that despite the currency hitting a record low of 80 rupees per dollar, the likelihood of a recession occurring in India is extremely slim. The analysis indicates that India is highly unlikely to enter a recession.

Performing against economic obstacles, India's economy continues down a positive path towards its $5 trillion GDP milestone, as the rest of the world grapples with potential recessions. When the global economy took a hit from the COVID-19 pandemic, India's government and the Reserve Bank of India (RBI) made wise choices to minimize the adverse impact. With a measured connection to the global economy, India's economic independence shields it somewhat from downturns in the US and Europe.

India's economy has been somewhat integrated into the global economy, but neither the US nor the global recession are immune to it. India was never coupled completely with the worldwide economy as is somewhat autonomous of worldwide business sectors. A ton really relies on how worldwide asset streams act on the off chance that there is a downturn in the U.S. what's more, Europe. The gap between their inflation numbers and the U.S. core inflation target continues to evade monetary policy changes.

With a population of more than 1.3 billion individuals, India's economy thrives due to its diverse range of agricultural, manufacturing, and service sectors. This diversification is crucial in minimizing economic risks by distributing economic activity. Moreover, India's colossal consumer market adds stability as consumer demand remains relatively constant even during global economic downturns. The country has also implemented significant reforms and reinforced regulations in its banking and financial systems, thus strengthening the resilience of the financial sector and lowering the chances of financial crises. Additionally, India benefits from a youthful and expanding workforce, which drives productivity, innovation, and consumption, thereby reducing the likelihood of severe labor market disturbances in times of economic recession.

While India is not completely immune to global economic challenges, its combination of a large domestic market, a diversified economy, a resilient financial system, proactive government policies, and a demographic advantage contribute to its relative safety from recessionary pressures. However, it is essential for India, like any other country, to remain adaptable and vigilant in navigating potential economic challenges as circumstances can change rapidly.

Thank you.

Regards,

Omkar Sutar,

Kautilya, IBS Mumbai.

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