Donald Trump’s aggressive trade policies have created a lot of upheaval in the US. The US stock market has seen a huge decline, S&P 500 has fallen more than 10 percent from its highest level. The possibility of economic recession is increasing. There are signs of recession in the US economy. American companies are hesitant to invest and generate jobs due to trade war and high tariffs. KPMG chief economist Dianne Swank says that the US may be in the grip of recession earlier next year. In such a situation, the question arises that what will be the effect of America’s economic recession and high tariffs on India?
What do the experts say?
Experts say that if the US is in the grip of recession, then India will not remain untouched by this. However, he believes that the recession in the US will not affect the Indian economy much. The policies of the Government of India and the monetary policy of the RBI are capable of balanced this effect. In such a situation, India needs to be vigilant. But there is no need to panic.
According to the report, the impact of the decline in the US market is also being seen on the Indian stock market. The BSE Sensex has fallen 14 per cent from its highest level, although the Indian stock market will remain strong for a long period, according to Morgan Stanley report and the Sensex can reach 1,05,000 levels by the end of 2025. Apart from this, Indian exports may also get a shock. America is one of the major export markets for India. If America increases its tariff, the demand for Indian products may be affected. Sachchidanand Shukla, the chief economist of the N&T group, says the economic downturn in the US may affect dollar -based investment and foreign capital flow in India.
How long does the recession last?
EY India chief policy advisor DK Srivastava said that demand may affect demand due to government spending and employee salary cuts in the US. However, he believes that this recession will not last long and the fall in energy prices can provide relief to the US economy.
Effect on FDI:
The US recession may strengthen the dollar, which will weaken the Indian rupee. This can affect foreign investment (FDI) and portfolio. Experts believe that India will still be one of the fastest growing economies in the world. According to the IMF, India’s economy is expected to grow at a rate of 6-6.5%.
On the other hand, according to media reports, Madan Sabnavis, the chief economist of Bank of Baroda, says that the impact of Trump’s tariff policy can be temporary. If other countries reduce their tariffs, it will also boost American exports, which can reduce the possibility of recession. DK Srivastava of EY says that the Government of India should focus on increasing domestic demand. Increasing spending on government infrastructure projects will strengthen the Indian economy and reduce the impact of global recession.
