The Indian economy is expected to grow at the rate of 6.6 percent in FY 2023-24, according to the World Bank, even as it projected a gloomy outlook for the global economy. Does the Global Recession present Opportunities for India to expand its economy?
Image Courtesy: Fears of Global Recession & Impact on India
Global Conditions:
Global inflation is at an all time high. With prices of essential goods rising experts say the worst is yet to come. Two of the main contributing factors behind this are the pandemic and the Russia-Ukraine war. A long period of moderate inflation and low interest rates ended after COVID-19 took over all the global economies. To sustain the businesses and to control unemployment level in the economies, governments worldwide injected trillions of dollars as support to maintain the consumption levels in the economy. This has sustained the businesses but has disrupted the demand and supply chains. The Russia-Ukraine war has contributed to a surge in the global oil prices. The ongoing energy crisis along with price rise is especially taxing on the poor- since people with low incomes are the most vulnerable. With the ongoing winters, fuel is a necessity for heating up homes hence the fuel consumption has increased but the poor are hardly able to make ends meet as they are facing a financial crunch.
Global Impact:
Decline in domestic investments: Current fragile economic conditions, rising interest rates and high inflation, will be especially hard on emerging markets and developing economies, the World Bank said. As the economies will mainly struggle with heavy debt burdens, weak currencies and income growth, It is forecasted that businesses will slow down and there will be a decline in domestic investments. The World Bank report also noted that rising interest rates in developed economies like the United States and Europe will attract investment capital from poorer countries, thereby depriving them of crucial domestic investment. The report also states these high interest rates will slow the growth in developed countries at a time when Russia’s invasion of Ukraine has driven world food prices up
Another major impact is the cost of living concerns. The World Food Programme in its research paper “Projected increase in acute food insecurity due to war in Ukraine” estimates an extra 70 million people worldwide have been driven closer to what it calls a “tsunami of hunger” since the start of the Ukraine war. This shortage of food combined with the ongoing food price inflation will worsen the food price crisis further. With the fuel rates being at their peak and winters increasing the fuel consumption, the labour class is facing the worst price crunch. Hence the workers have taken strike action in sectors from healthcare to aviation to demand that wages keep pace with inflation. In most cases, they are having to settle for less.
These two factors- food crisis and labour strike- together have increased the cost of living in many economies. Thus, for many developed countries, cost of living concerns are their main priority.
Given these conditions India is said to grow by 6.6%. Experts see no sign of decline in growth of the Indian economy. Why? Is India ready to tackle the recession or is this slow growth rate an alarm for the upcoming recession in the Indian economy? To know more stay tuned for Part 2!
- Padmaja Uttarwar
SYBSc (2021-2024)