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<\/div>\nIndia could benefit from a recession-led fall in commodity prices.(File)<\/p>\n<\/div>\n
New Delhi: <\/b><\/p>\n
Amazon founder Jeff Bezos’s advice that consumers keep cash safe and avoid unnecessary spending has reconfirmed fears of the US economy slipping into recession.<\/p>\n
The markets have been abuzz with fears of a recession in the world’s largest economy. High inflation in the wake of the energy crisis due to the Russia-Ukraine war first sparked the concern. Large-scale tech layoffs further accentuated the fear. Jeff Bezos’ comments come even as Goldman Sachs has forecast that the US will narrowly avoid a recession.<\/p>\n
Policymakers in India appeared confident that growth prospects are bright. Even as the finance ministry has kicked off budget consultations with industry stakeholders, Niti Aayog Vice-Chairman Rajiv Kumar has said there is no such prospect of recession in India, though India’s growth may be negatively affected by the global conditions.<\/p>\n
“We will still manage to grow at 6-7 per cent in 2023-24,” he said.<\/p>\n
Recession in the US will have its imprint on Finance Minister Nirmala Sitharaman’s next budget.<\/p>\n
India is not immune to global recession or slowdown which impacts trade, commodity prices, and capital flows.<\/p>\n
Previous recessions\/slowdowns tell that auto and ancillaries, metals, textiles, etc. have been affected, but gems and jewelry, chemicals, and pharmaceuticals have been rather robust, according to Kotak’s study.<\/p>\n
“Historically, discretionary consumption items have exhibited more volatility than staples,” Kotak said in the report.<\/p>\n
“Lower exports coupled with relatively strong domestic growth (hence, higher imports) could risk worsening the external balance. Exports have helped push GDP (gross domestic product) back to pre-pandemic levels. We maintain our FY2023-24 real GDP growth estimates at 6.8-6% with downside risks in the near term given the external sector headwinds,” Kotak said.<\/p>\n
India could\u00a0benefit from a recession-led fall in commodity prices. An implied outcome of recession would be lower prices as demand reduces.<\/p>\n
“In a scenario of a global slowdown, it is expected that commodity prices will correct lower,” Kotak said.<\/p>\n
While disruptions to exports might lower manufacturing growth and impact consumption to some extent, given the low dependence on exports, India will be a relatively favored destination for foreign fund flows, especially when compared to export-oriented economies.<\/p>\n
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