What will save India from the Recession?

INTRODUCTION

India is 5th largest economy in terms of Nominal GDP and 3rd largest in purchasing power parity. According to a Bloomberg report” probability of recession in Asia is around 20-25% whereas in the USA is 40% in Europe it is 50-55% and chances of India will hit recession is 0%”. According to the Reserve bank of India, things that are working for the Indian economy are agriculture activity is strong, and the manufacturing and service sector are showing a positive impact on the Indian economy.

Factors that will help India during the recession: –

Structural reforms

One of the major reasons for structural reforms is the success of digitalization in India. During the covid crisis just because of digitalization India’s Information Technology has seen sharp growth because the availability of the internet in every part of India was available as well as transactions of money through digital payment systems have helped the economy to overcome corruption, increase taxpayers in India and increased transparency in the economy.

Increase in retail investors

Earlier it has been seen that the Indian stock market mostly relied on foreign investors’ investment. In the year 2008 foreign investors sold 520-billion-dollar stocks and the Indian market fell by 60% but in the year 2022 foreign investors sold 2 trillion dollars of stocks and the market fell by 6%. The power of Indian retailers has increased in the stock market and result of which stability has been seen in 2022.

Sufficient foodgrain stocks

In recent years India’s dependency on foodgrains has fallen by a significant level. The importance of buffer stocks is very important during the crisis in 2020 covid crisis. Dependency on the agriculture economy has risen significantly same is happening in the Russia-Ukraine war if a recession hits in 2023 India will likely overcome the shortage of food grains and the reason for building buffer stock is to provide food security to the country during the crisis.

Adequate international reserves

Regarding foreign reserves, India’s total foreign reserves stand at around $532 Billion in the year 2022. Foreign-exchange reserves act as a first line of defense in case of economic recession, and they also help the currency to stabilize in a challenging market situation.

Political stability

If we look at India’s neighbouring countries, we can see that the unstable political environment had led to an economic crisis many foreign investors are backing themselves from investing in these countries, and chances of hitting recession are way higher in India’s neighbouring countries. India’s political stability shows that foreign investors in India are investing in India as they are confident in maximizing their returns at the time of recession when most of the investors take their money out of the market.

Demand

In recent years it has been seen that the middle class in India is increasing and as a result demand for Products and services will also increase. India’s domestic demand is so strong that we don’t have to rely on exports during a recession. It was seen in the 2008 great recession that India had overcome the recession just because of domestic demand.

CONCLUSION

According to experts, the Indian economic condition will be in a comfortable position if a recession hits the global economy. Indian economy will continue to perform well in terms of economic growth. Growth will be supported by favorable fiscal and monetary policy.