The US recession has a mid-term impact on India.

According to Nomura, the US is expected to face ‘a prolonged mild recession’ soon. This will affect the Indian economy in the mid-term. The growth is expected to slow down. 

Nomura, a US-based research institute on Thursday stated, as per their In India Normalization Index (NINI) that despite the rising inflation, the Indian economy has risen above normal levels, and there is tremendous growth in investments, manufacturing, services, as well as in the external sector. The service sector prevails 40 percentage points (pp) above the pre-covid levels. In March 2022, this was recorded as 4 pp below pre-covid levels. This progress will help India’s growth in the near term. Apart from this, the Indian economy’s growth is expected to slow down as India is the only Asian country whose inflation rate is above the target. 

On Wednesday, Jerome Powell, chairperson of the Federal Reserve, said that the actions taken will not be done to battle the recession but to control rising prices in the economy. He mentioned bringing price stability to benefit the labor market. He also cited the possibility of a ‘prolonged mild recession’. If the inflation rate keeps increasing and rises above the target of 2 percent the Federal Reserve will hike the repo rate by approximately 75 basis points. The recession in the US would tighten their current financial conditions, and disrupt the supply chain, and the energy and food industry will struggle the most. 

India’s merchandise export with the US is estimated at 18 percent. The exports majorly consist of IT support contributing 60 percent of total exports. With the US economy sliding into recession this will be the first sector to be impacted. This will directly affect the country’s Gross Domestic Product (GDP). The current growth of the Indian economy is 7.2 percent, according to word bank but it is estimated at 5.4 percent in the next year. Currently in India, the high inflation rates and consumption growth will be tightened. It will impact the Indian economy in the medium term. 

US recession.

A recession is an economic condition that indicates a decline. The country experiences a slowdown or reduction in economic activities which include trade and other industrial activities. Its immediate effect is increased unemployment. 

In the United States, there have been 18 recessions recorded so far. The great depression is the biggest one. According to wall street experts, there is a 40 percent chance for the US to get into recession in the upcoming two years, and 25 percent of which will begin in the current year. The current recession is expected to be mild and will be prolonged. In the last week the stock market, commodities, as well as yields, have taken a hit besides the risk of recession. 

The manufacturing growth slowed after China declared a lockdown in certain parts. Asian countries including India, European countries as well as the United States have experienced this. The disruptions in the supply chain due to the Russia-Ukraine war have also affected economic growth. The Britain economy is expected to face a recession in the next 12 months. There is a 35 percent chance of that happening with the current manufacturing challenges faced by the country. 

Though the Indian economy has seen great progress post-pandemic, the global economic conditions prove to be a threat to the economy. With the United States experiencing recession global economies will be affected. It is not yet affected completely but it has been initiated. Soon, it is expected to conquer the economy but with appropriate measures, it can be controlled.