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No recession for Indian economy due to its independence: Report

No recession for Indian economy due to its independence: Report

Mumbai:

Global ratings agency S&P on Tuesday said that although the US and the euro area are headed for a recession, India is unlikely to face the impact given the “uncoupled” nature of the economy. country with the global economy.

“The Indian economy is far apart from the global economy than we normally think, due to strong domestic demand, even though you (India) are a net importer of energy. But on the one hand you have sufficient foreign exchange reserves and your companies have managed to maintain a healthy balance sheet,” Paul F Gruenwald, chief economist and chief executive officer of S&P Global, told reporters. here.

In fact, India has never been fully integrated with the global economy and is therefore relatively independent from global markets, he said, adding that it depends a lot on how global capital flows are. demand to behave if there is a recession in the US and Europe. Their inflation numbers continue to shy away from the monetary actions of their central banks because the gap between the core US inflation target and the actual number is 3 times, at 6%.

He argues that inflation and the resulting Fed measures are the main threat to the US economy, the world’s largest economy is moving towards recession, which is the result of an overdeveloped economy. hot because even after inflation hit a 4-decade high. , the unemployment rate is very low at 3.7%.

“Our view is a 50-50 chance of a recession in the US as the output gap remains positive but consumer and business sentiment is negative. Is this a soft landing? this will be known later, Gruenwald added early in the year or early next year as the impact of a large Fed rate hike will only be known at that time.

Regarding the euro area, the executive said the issue is more structural and difficult. It will take time to recover as the crisis is the result of geopolitical issues (Russian-Ukrainian war) and sky-high energy prices after EU nations start to reduce their dependence on gas from Russia since February. But again, the EU unemployment rate is as low as 6.5%.

Gruenwald said the continent would face a crisis if unemployment became more pronounced, adding that the chances of a recession in the eurozone were due to the Russia-Ukraine war and resulting in energy security. problem. It will take a few years to recover if it falls into a recession unlike the US, which can recover much faster.

U.S. and European recessions depend on central banks ignoring slowing growth and choosing instead to fight inflation.

Describing China’s downturn as the worst in decades, he stressed that it was a self-inflicted pain due to their zero-tolerance policy on Covid.

According to him, China has never missed a growth target as badly as this year (falling from more than 5% to less than 3% or even lower). The communist party congress in November may produce some positive surprises, in which case the negative forecast can be reversed.

As for a question that comes with all this global frenzy whether the agency has a fresh take on India’s growth numbers, Crisil Ratings (majority-owned) chief economist DK Joshi of S&P Global Ratings) told PTI it kept its recent forecast, in which it “expects the economy to grow at 7.3% this fiscal and fall to 6.5% this fiscal year” next key period, with more downside risks to both numbers.” Joining Joshi, Gruenwald said that despite these difficulties, India will do a lot better than the rest of the world.

(Except for the title, this story has not been edited by NDTV staff and is published from an aggregated feed.)

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