Recession: India may benefit from recession in advanced economies

Fears of a global recession have gripped all markets alike but the analysts have opined that recessions in advanced economies may benefit the Indian economy.

“India being a net importer of commodities should benefit on the inflation front,” Samiran Chakraborty, managing director and chief economist for India at Citigroup, said in an interview with Bloomberg Television on Monday. He added that India would still face pressures from a global slowdown as it will crimp exports and economic growth.

“Since, at this moment, policy making is entirely focused on inflation control, it appears to be that in a perverse way this can benefit India to some extent,” Chakraborty said.

Worries around a recession have emerged as prominent central banks around the world like the US Federal Reserve, ECB are hiking interest rates aggressively to curb the surging inflationary pressures amid the ongoing war in Russia-Ukraine and the roll-back of pandemic-era measures.

Owing to inflationary pressures the Reserve Bank of India has hiked its benchmark lending rate by 90 basis points since May. Analysts feel that more hikes may be announced as the headline inflation has remained above the threshold of the Monetary Policy Committee (MPC) of the central bank and is expected to remain so in the coming few months.

Inflation won’t be painless


Deputy Governor in charge of monetary policy, Michael Patra recently said that the inflation based on the consumer price index, would stay above the RBI’s target range of 2%-6% for the next three quarters.

Failure to keep inflation within the mandated range for three straight quarters will force the RBI to write a letter to the federal government, explaining why it missed the target and lay out remedial measures.

“There are indications that inflation is peaking as monetary policy works through into the economy,” Patra said, adding CPI is expected to drop below 6% in the fourth quarter of 2023 and ease to touch 4% in two years.