The world is going through one of the toughest times economically. Various factors like covid, Russia-Ukraine war and climate change has brought down economic growth of biggest economies like US, Europe and China BUT India seems to weather the storm of economic downturn till now.
The world is worried about a recession and there is no doubt that an economic downturn is happening in leading economies. So, the question arises does India face a recession too? Bloomberg recently conducted a survey of economists where they were asked a simple question what the probability of recession is.
In the United States the probability is around 40 and in Europe it’s between 50 to 55 percent. So, where does India stand and what is the probability of a recession in India? ZERO percent, that’s what economists say.
There is a zero percent chance of a recession in India. The Indian economy could dodge a recession. That’s also the assessment of India’s central bank the RBI as well. The reserve bank of India the RBI issues a monthly bulletin it gives an assessment of the economy. The bulletin for July makes some interesting points.
It says two things are working in India’s Favor: number one agricultural activity remains strong and number two manufacturing and services sectors are showing some momentum. Also, the Russian supplies has been a great addition to these. So, let’s analyse the factors helping India to dodge the recession in detail.
This year India had a good monsoon. A healthy monsoon season increases farm productivity, which raises rural households’ income and the demand for consumer items. As India agricultural output is one of its biggest economic contributors it helps economic growth a lot. It also keeps inflation at manageable levels. All of this results in a more positive economic outlook.
Manufacturing and Service Sector
In the service sector companies have done well in the last two quarters and have posted good earnings. Purchasing manager’s index is a good indicator on how well the companies are performing in an economy.
PMI touched eight months high in this month and which shows the Indian economy is getting more robust. The GST collection at its highest level this month since its rollout. Also, the debt to GDP ratio of India is less compared to other developed nations.
When the Russia- Ukraine war started many countries started imposing sanctions on Ukraine which now we can see backfired in big way as Russian state owned companies are seeing record breaking profits while Europe is getting hit hard by economic and energy crisis.
As the sanctions on Russia hits outrageous level Russian goods are getting cheaper, which is helping India a lot. In April Russia became the fourth largest supplier of oil to India. Still march India had bought 66 billion barrels of crude oil from Russia in thirty six percent discount than market price. India also imports coal, soya beans, fertilizers, sunflower oils from Russia. Every day cheaper Russian supplies have helped India contain inflation to an extent.
It is not to say that inflation has come under control in India. There are still worrying shortages of essential goods and that’s still hurting people and prices are still high but if the RBI is to be believed the worst could be behind us.
Governor Shakti Kant says inflation could cool starting October. Asia in fact is doing much better than the rest of the world and that could help India further. The international monetary fund (IMF) has shared some numbers today.
Their projection for Asia is that the region will continue to grow but at 4.6 percent What about India the IMF predicts strong performance by the Indian economy as well. It projects a 7.4 growth rate for India that’s the highest for any major economy. 7.4 percent and all of this is good news, but we do live in unpredictable times global events which can easily append India’s recovery. Safe to say though that India has reason to be cautiously optimistic about its future.
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