But, is the Indian growth story resilient enough to weather the storm of the global recession? How long can India continue to grow relatively well in a globally connected world? Opinion is divided on that one!
In the Times of India online survey, 7 respondents said that India’s growth story is different from the world. 6 experts were of the view that India is not isolated, while only one said that it is difficult to estimate the extent of the impact.
domestic growth story
According to Radhika Rao, senior economist at DBS Bank, the resilience of India’s domestic sector will act as a buffer against slowing global growth. This is compared to North Asian economies that depend more on exports. Rao told TOI, “The plan to broaden the footprint of the economy in global trade as well as manufacturing value chains is unlikely to go away completely.”
An economist at a leading housing finance company says India is largely a domestic demand-driven economy, so it is largely isolated. Another economist at a leading industry body agrees, “Domestic consumption, which has a major share in India’s GDP, is seeing a recovery. Both consumption and investment drivers indicate positive momentum,” said the economist.
Madan Sabnavis, Chief Economist, Bank of Baroda, expresses confidence in the India story. “India’s growth in my mind is predominantly domestic and hence we can feel confident of growth this year. While it will be higher if there is no recession in the West, it will still be relatively impressive in 2022 and 2023 ,” They said. TOI reports.
However, Sabnavis admits that India is not immune to shocks in investment flows, interest rates and currency. “These indirect effects will continue,” he says. But the growth rate will be in the range of 6.5-7 per cent this year and maybe a little less next year.
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Nikhil Gupta, chief economist at Motilal Oswal Financial, believes that India has been relatively isolated, but will not remain insulated either. “Accordingly, we see growth weakening to ~5.5% in FY20,” he says.
Satchidanand Shukla, Chief Economist, Mahindra Group, points out that the trend of growth is different and not different. “In the near term, the growth correlation is high,” he says.
Impact of Recession in the Linked World
The Indian economy is no different, says DK Srivastava, chief policy advisor at EY. “It is significantly linked to the rest of the world through exports and imports, financial flows and a strong technological interface,” says Srivastava.
Indranil Pan, chief economist at Yes Bank, agrees, saying he expects the economy to slow in line with global growth. “However, the relative hit may be less as India’s growth is still heavily dependent on domestic personal consumption expenditure, government expenditure and private investment in capacity addition,” he says.
Dr. Roopa Rege Nitsure, Group Chief Economist, L&T Financial Services, explains that India is linked to the global economy through trade, investment and global supply chains.
Dun & Bradstreet’s Global Chief Economist Dr Arun Singh has warned that India will be affected in many ways. “The cost of living crisis has pushed consumer confidence levels, a proxy for future demand, to record lows in the US, UK and China. Consumer confidence has also declined significantly in other major economies such as Germany, Italy and France. Has come.” Singh says.
They believe that this will mean that exports will decline in the near future. He said, “India’s merchandise exports are set to decline at an average rate of 0.2% in the third quarter of 2022, compared to an average growth of 15.4% in the first half of 2022. Noting that real interest rates in major economies are still negative nominal interest rates will continue to rise.” telling.
According to Singh, the impact of the tight monetary environment is being reflected in the funding that some sectors are facing. “Moreover, there are more than 5000 foreign companies registered in India. Deterioration in the health of parent companies will eventually affect their subsidiaries in India through budget cuts and possible reduction in workforce,” he further added.
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Vikas Vasal, national managing partner of tax at Grant Thornton India, says it is still debatable how much of a recession or recession will impact the global economy. “It is not clear how much of an impact it will have on various economies, including India. Having said that, a consensus is emerging that although a major recession is likely to have an adverse impact on India, a mild recession or recession Not possible.” he says.
India in a relative sweet spot?
Runen Banerjee, partner at PwC, says though the Indian economy is no different, it has several shock absorbers. “The depth of the financial market has increased with 3x retail investor growth in the last 3 years. Private consumption is strong,” he noted. “Digitisation and progressive formalization of the economy is increasing tax revenue for the government, providing it with fiscal headroom to invest in infra as well as pump up the economy,” he told TOI.
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Banerjee believes that at a time when the world is looking towards China+1, boosting manufacturing is also helping. “Capital flows into India will be affected relatively less compared to other emerging economies as it will remain an attractive market to invest in as there will not be many alternative markets offering better return prospects. This makes the growth story in India a bit different. other major economies,” he explains.
EY’s Srivastava believes that the current supply chain shifting could work in India’s favor in the medium term. “While the Indian economy has not been isolated, it has attempted to shield itself against global recessionary trends by building strategic linkages in a fragmented global economy,” he added.
Grant Thornton India’s Vassal says India has a large domestic market and domestic demand has grown across sectors. Going forward, investors and global companies are looking at India as a favorable investment destination from a mid to long-term perspective, he tells TOI.