Will 2023 See a Recession in India? An Analysis of Economic Indicators

“The global recession is expected to hit India after June.”

The above quotation is not a headline but a comment given by the Indian Union Minister for MSMEs on January 16, 2023. This comment created a huge controversy in the media outlets as well as common households of India. After all, everyone is not a financial specialist to analyze whether the comment is logical or not! You may think that it is obvious for India to come under the wave of the global recession. Surprisingly it’s not. Wait. What? Is it possible for India to shield itself from the recession? Will the global recession hit India in 2023? Let’s find out. This article presents a thorough analysis of economic indicators to analyze whether 2023 will see a recession in India or not.

A Brief Background

The world economy was striving hard to heal itself from the recession of the coronavirus pandemic in 2020. It was among the worst recession after “The Great American Depression 1929-1940” and “the 2008 Global Financial Crisis.” However, this was not the end. As soon as the global economy was gearing up to overcome the pandemic’s recession, the Russia-Ukraine war began with bitter greetings. Thrashing the global economy once again! 

Global Recession 2023

According to CEBR (Centre for Economics and Business Research), a global recession will start in 2023. And yes, it did! The new borrowing costs declared to fight inflation may become a key reason for the shrinkage of several economies of the world. The annual World Economic League Table of British consultancy presented a report saying the global economy will halt at $100 trillion and the governments will struggle against the growing costs and inflation.

Top economies of the world like the U.S.A, Europe, China, and Japan have begun to slow down with the beginning of 2023. Thankfully, India is not on the list yet. Why? You may wonder. The following section describes the reason for it.

Recession in India: Impact of Global Recession on India

The World Bank said that despite the global recession, the Indian economy will continue to grow at the rate of 6.6% in the fiscal year 2023-24. Although, the economic growth is only 4% in the January to March 2023 quarter. But based on the latest RBI projection, the Indian GDP will remarkably grow at 7% in the upcoming fiscal year. India has the potential to become a $26 trillion economy.

Factors that will save India from the global recession 

The Indian economy can protect itself from the negative consequences of the global recession of 2023 in the following ways-

• Benefits from global trends and diversification: While top economies of the world are facing harsh conditions, simultaneously the economies of the South Asian region including India and Bangladesh are flourishing well. Because of the diversification of manufacturing supply chains away from eco-giant China. 
• The marginal impact of recession: The recession will impact India marginally because Indian exports are not much affected due to the economic slowdown. With strong services exports worth $254.5 billion in 2021-22, India holds a strong position in IT (Information Technology) and BPO (Business Process Outstanding) services exports.
• Domestic factors: The Indian economy is primarily driven by domestic factors. Being an agricultural country, our economy is heavily dependent on farming activities. This also prevents mass layoffs of employees like in other developed countries.
• Golden opportunity: India has the opportunity to seize a higher share of transformational services based on its expertise in the IT sector.

Recession in India: Negative Aspects

According to the Chief Economic Forum, India will face a significant degree of inflation. Also, with the global recession in 2023, the price of food, energy, and inflation may reach a peak point in India. Even though the leading economists suggest the minimal impact of the global recession in India. But a humongous populated country like ours needs 10% GDP growth per year to become a poverty-free nation. So, a GDP growth rate of 5%-6% gives the vibes of recession in India, despite better performance than in the US or Europe.

Adverse effects of the recession on stock markets

The global recession of 2023 is going to adversely impact the Indian stock markets. The World Bank described that due to the recession, foreign institutional investors will be put out of the Indian stock markets. Consequently, the equity prices will drop leading to steep losses for retail investors.

Conclusion

Over the past two decades, India has synchronized its growth cycles with the advanced economies of the world. It was fueled with enhancement in capital flows and trade integration. However, the global economy is in a perilous position. Recently, the IMF (International Monetary Fund) forecasted that the risk of recession is lower in India. Although India has notably protected itself from recession in 2023; it should not ignore the precautions. Therefore, the leaders must look beyond the crisis by putting qualitative investments. The key investments may include food production, energy innovation, education, skill development, profitable market, and employment. Thus, it will aid to gain a highly potent economy of India in the future.