Is India Headed Towards Recession

1. Is India headed towards recession ?

2. What Is Recession ? • Temporary economic decline • Trade and industrial activity reduced • Fall in GDP between two successive quarters.

3. Main Causes of Recession 

4. RECESSION VICIOUS CYCLE OF RECESSION

5. History Of Recession USA India – history of GDP

6. Will there be recession in 2022?

7. Aftermath of Covid-19 Pandemic In 2022, we observed negative developments such as • Expansionary monetary policies taken during pandemic cause commodity price inflation • Russia-Ukraine war put further strain on commodity prices, especially oil • Supply chain disruptions • Weaker global growth prospects • In response, Central Banks aggressively raised interest rates • Now there is possibility of vicious cycle of economic de-growth High inflation  Raise Interest Rates  Reduced Spending  Profits of Companies Decline  Stock Markets Fall  Economic slowdown  Recession

8. India Vs USA Scenario • Stagflation (inflation + stagnation) likelyin USA because •  USA GDP dropped 1.4% 2022 Q1 • Yield curve inverted in Mar 2022 • Domestic demand sluggish • India’s economy will slow down because • USA accounts for 18% of India’s merchandise export, 60% of IT export • India’s own inflation is highest amongst Asian countries, above RBI target of 6% • As USD strengthens, Rupee will depreciate, and CAD will increase • However, India is unlikely to face recession itself due to • Sufficient domestic demand • 2022 GDP forecast still 7.2% (Nomura) • Virtuous Cycle: High USA interest rates  Strengthening USD  Reducing oil prices  Stabilizing commodity prices  Relief input cost inflation  Increase Exports

9. Recession is slowdown in GDP for 2 consecutive quarters It triggers viscous cycle in economy Covid-19 spurred recession causing factors like high inflation USA likely going through recession now India’s economic growth will slowdown, but it will not start shrinking as it will be protected by domestic demand and policies SUMMARY