Is a Global recession on the way?
Something so shocking is happening right now that has never occurred in the previous 50 years.
What then are the causes of this world recession? Are there any possible solutions? What will the future hold for India? These are the concerns that are currently being discussed.
The globe may be moving toward a worldwide recession in 2023 and a wave of financial crises in emerging and developing economies, according to a recent World Bank analysis, as central banks throughout the world raise interest rates at the same time in reaction to inflation.
According to the report, interest rates have been rising globally this year with a degree of regularity not seen in the previous fifty years. It is predicted that this pattern would continue even into next year.
Economic troubles are already showing their first signs.
The report stated: “However, it may not be possible to return global inflation to pre-pandemic levels with the currently anticipated trajectory of interest-rate hikes and other policy measures.
Investors anticipate that until 2023, central banks would boost the average rate of their global monetary policies by more than 2 percentage points, to approximately 4%.”
According to the research, if supply disruptions and labour market tensions don’t subside, those interest rate rises might result in a core global inflation rate (excluding energy) of roughly 5% in 2023.
Nearly twice the five-year average before the pandemic, and central banks may need to hike interest rates by an additional 2% points to keep inflation under check.
Even if interest rates are raised, controlling inflation remains tough, so raising interest rates will not enough.
Are there any possible solutions to stop the recession?
As per World Bank Group President David Malpass, “global growth has slowed significantly, and more deceleration is likely as more nations enter recession. I am deeply concerned that these tendencies will continue, with severe long-term effects for those living in developing markets and emerging economies.
Malpass continued, “Policymakers might switch their priority from lowering consumption to increasing production in order to achieve lower inflation rates, currency stability, and quicker growth.
The current policy of central banks around the world is to raise interest rates, which lowers consumption levels. However, according to Malpass, the emphasis should be on increasing output rather than lowering consumption in order to deal with this coming inflation.
In order to promote growth and the eradication of poverty, policies should work to increase capital allocation, productivity, and investment.
The World Bank went on to say that multiple historical signs of global recession are already flashing warnings.
The world economy is already experiencing its worst slowdown following a post-crisis rebound since 1970.
All of this indicates that there will be a global recession in 2023, but the question is:
Where will India stand during such a recession and what challenges will it face?
We learned around the end of last month that India has the fastest-growing big economy in the world during the April to April – june period of this year, rising by 13.5%. As the fifth-largest economy in the world, India also displaced Great Britain.
Some people were disappointed because some surveys had indicated an even faster growth rate. However, the long-term course of Indian economy appears to be predetermined; by 2027, India is predicted to surpass Germany and become the fourth-largest economy in the world, and by 2030, it would surpass Japan.
India is now considered to be the “second most significant generator of global growth after China,” according to Michael Patra, deputy governor of the Reserve Bank of India (RBI), who highlighted this in a recent speech. India’s growth is mostly financed by domestic savings.
India’s contribution to the global gross domestic product (GDP) is already at 7%, compared to China’s 18% and the US’s 16%.
The world economy has been experiencing challenges due to factors like rising energy and food prices, China’s zero-covid policy, and Russia’s foolish conflict against Ukraine.
The Indian economy has remained stable and robust, in part due due to government intervention and in part due to its unique structure.
How can India emerge stronger from the recession?
India’s per capita income continues to lag behind countries it is catching up to economically.
A persistent policy effort would indeed be required to make sure that the current trajectory does not simply reverse.
To make the country more investor-friendly, significant reforms are required, especially now that China is no longer the preferred partner. Indian officials should have the guts to seize this singular opportunity in India’s political economy as investors look for new venues. But never in history has India’s story appeared more credible than it is today, with the world in crisis and India shining out as a symbol of hope.
Geopolitical Advantage to India
India’s current position in world politics is a result of its economic trajectory. There’s a reason why West has persisted in having serious interactions with New Delhi despite its disagreements with India about the Ukraine. In spite of all the unfavorable coverage India has experienced in the West, relations between India and the West have improved tremendously.
The growth of India as a reliable geopolitical and geo-economic force in the twenty-first century is acknowledged by officials in the West as the main story.
India is still preserving its ties with Russia despite the ongoing courting between the West and India.
China is also caught in a difficult situation due to India’s tenacious opposition to its relentless pursuit along the Line of Actual Control.
Earlier, New Delhi’s unwillingness to capitalize on the existing balance of power cost it dearly.
In order to advance its interests, a smart nation should always be able to recognize possibilities in the current framework of international affairs.
Malpass continued, “Policymakers might switch their priority from lowering consumption to increasing production in order to achieve lower inflation rates, currency stability, and quicker growth.
FAQ
What causes a global recession?
A series of economic events, such as disruptions in the supply chain, a financial collapse, or a global disaster, can lead to a recession. A recession can also occur following an inflationary period.
How often is there a global recession?
Four worldwide recessions have affected the world economy in the 70 years after 1950: in 1975, 1982, 1991, and 2009.
What happens in a global recession?
An extended time period of declining worldwide economic activity is referred to as a global recession. Since trade links and international financial institutions spread economic shocks and the effects of recession from one nation to another, a global recession comprises of more or less coordinated recessions across several national economies.
Is a recession coming in 2023?
In 2023, a recession is currently anticipated. This is what might cause a severe global recession. Strong job growth suggests that now the economy is doing well. But the warning flags are getting stronger.
Who benefits from a recession?
When renting is expected to become a more desirable alternative, if not the only one, during such a recession, rental agencies, landowners, and property management firms can prosper.
