Global recession pulling the strings of India’s economy

Picture credit- The Hindu

Fear of recession looms over US and as aphorism goes whenever US sneezes, world catches a cold. Yield curve is inverting in US, past 10-year US bond yield has fallen below the 3-month bond yield; thus indicating economic uncertainty not at national level but at global level.

Last time during 2008-09 when US triggered recession, it ultimately wiped out more than $2 trillion in terms of economic growth potential. This time the repercussion is going to be severe as India’s exposure to global economy has increased, MNC’s are enjoying bigger bite of Indian marketplace.

The impact of impending US recession and economic global slowdown on India is quite evident from the way Indian market is crashing. As the end of September approaches, the mood in financial market is fretful. India’s economic growth slowed down to 5.8% in 4th quarter of 2018-2019 and the annual growth plummeted at 6.8%, slowest pace in the last 5 years, according to the data released by CSO (Central Statistics Officer).
In the 1st quarter of fiscal year 2019-2020, economy crawled at 5%, compared to 8% last year, triggering gloomy mood across all sectors. Weak consumer demand and credit squeeze has already given Indian automobile sector deep wounds. Car sales have crashed to 20 years lows and car makers are shutting down factories and laying off workers.
Manufacturing sector which holds 16% share of our economy has collapsed totally as growth stalled at 6% in 1st quarter this year. With the underlying drivers of growth sputtering, the slowdown is deeper and more entrenched.

Turbulence in world economy has knock on effects on financial channels. Gross Value Added (GVA) grew at mere 5.7% in Quarter 4th FY 2019, driven by contractions in agriculture, trade, real-estate business etc. Sluggish economic slowdown will trigger a period of prolonged growth slump and upset many aspects of Indian economy, precisely leading to increased job losses. And as reports states, unemployment is at a 45-decade high has already painted a worrisome image.  

People hoped for silver lining in Financial year 2019-2020 but it seems as if silver itself became a hurdle as silver prices touched sky with an all-time high mark of Rs. 45000 a kg, in the month of August, according to ‘All India Sarafa Association’. 
Global economic chaos has hit industrial commodity prices as bullion is also on roll.  These developments are likely to further strike our economy and others sectors.

Global recession worries fueled by escalating US-China trade tensions has already started affecting Indian economy and it will continue to collapse until government acknowledges economic slowdown. Economists all over country feels that strong policy reforms; a mix of structural and cyclical factors are needed to tackle the slowdown and deter further damage.

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