scorecardresearchIndian economy is a lot more decoupled from the global economy, recession unlikely: Report

Indian economy is a lot more decoupled from the global economy, recession unlikely: Report

Updated: 22 Sep 2022, 11:18 AM IST
TL;DR.
The US and European recessions depend on the central banks' ignoring slowing growth and opting to fight inflation instead. Meanwhile, Goldman Sachs cuts China's growth forecast for 2023 to 4.5%, down from a previous projection of 5.3%.
India was never fully integrated into the global economy and so is relatively independent of global markets.

India was never fully integrated into the global economy and so is relatively independent of global markets.

Global rating agency S&P said that even though the US and the Eurozone are headed to recession, India is unlikely to face the impact given the "not so coupled" nature of its economy with the global economy, PTI reported.

"The Indian economy is a lot more decoupled from the global economy than we normally think of, given its large domestic demand, even though you (India) are a net importer of energy. "But you have enough forex reserves on one hand and your companies have managed to maintain healthy balance sheets," Paul F. Gruenwald, S&P global chief economist and managing director, told reporters.

He said that India was never fully integrated into the global economy and so is relatively independent of global markets. He added that a lot depends on how global fund flows behave if there is a recession in the US and Europe. Their inflation numbers continue to dodge the monetary actions by their central banks as the gap between the US core inflation target and the actual number is three times 6 percent.

"Our house view is of a 50-50 chance of a recession in the US as the output gap is still positive but the consumer and business sentiment is negative. Whether this will be a soft-landing or not, it will be known either later this year or early next year as the impact of the massive rate hikes by the US Fed will be known only by then," Gruenwald added.

On the Eurozone, the managing director said the problem is more entrenched and structural. It will take time to recover as the crisis is the result of geopolitical issues (Russia-Ukraine war), the sky-high energy prices after the EU nations began to lower their dependence on gas from Russia in February. However, the EU unemployment rate remains low at 6.5 percent.

He said the house view is less than a 50 percent chance for a recession in the Euro zone which is saddled by the Russia-Ukraine war and by the resultant energy security issues. It will take a couple of years to recover if it falls into a recession, compared to the US, which may recover much faster.

The US and European recessions depend on the central banks' ignoring slowing growth and opting to fight inflation instead.

Further, Goldman Sachs cuts China's growth forecast for 2023 to 4.5%, down from a previous projection of 5.3%, Bloomberg reported.

Goldman Sachs said China is unlikely to begin reopening before the second quarter of next year as it tries to put several steps in place first, such as higher vaccination rates for the elderly and increased manufacturing of cheap and effective Covid pills.

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First Published: 22 Sep 2022, 11:18 AM IST