US Recession Impact on India

The US, the world’s largest economy, is teetering on the brink of a recession, despite recent modest growth. Inflation is cooling down, and the country faces a looming debt ceiling crisis. This situation could have a cascading effect on the Indian stock and bond markets, with the employment sector likely to bear the brunt of the slowdown.

Neelkanth Mishra, Chief Economist at Axis Bank, suggests that the US might enter a recession this year due to its high fiscal deficit, which has surged to $2 trillion. A recession may be averted temporarily by increasing the deficit, but it poses a long-term economic challenge.

The potential impact on the Indian market includes a reduction in foreign inflows, affecting the financial sector. India’s IT services and business services exports, constituting 10% of its total exports, may suffer if the US experiences a recession. Additionally, increased borrowing costs for Indian companies could lead to financial market volatility.

While some economists believe that a US recession may indirectly impact India’s jobs and goods, macroeconomic stability is crucial for India to weather these challenges. Despite global uncertainties, India currently experiences economic growth, creating a Goldilocks scenario amid worldwide economic uncertainties.

Re-reported from the article originally published in The One India