InvestorQ : Do you see the global slowdown likely and will that impact exports out of India?
sara Kunju made post

Do you see the global slowdown likely and will that impact exports out of India?

Mary Joseph answered.
11 months ago

One of the first persons to suggest that the US economy could go into a slowdown former Treasury Secretary Larry Summers. His contention was that if rates were hiked too quickly and taken too high, then it may not really contain inflation but instead it could end up choking the production and growth. In short, it could lead to a slowdown. A slowdown in the US would certainly impact the IT industry, but also the exports to the US.

Now, even Indian economists feel that this could lead to a situation wherein the rate hikes may not control inflation but instead kill growth and drive the US into recession. It will have negative repercussions for Indian exports, which had touched $422 billion in FY22. Remember, the US is India’s largest trading partner at around $120 billion of trade and one of the largest trade surpluses. That is why a slowdown matters to Indian exports.

In a recent report, EY India has also rightly pointed out that a slowdown in the Western developed markets of the US and Europe could negatively impact export growth and the export momentum in India. In fact, exports could be the biggest casualty of the US slowdown. A recession in the US and Europe could create lot of demand destruction for Indian products and services, hitting exports badly.

The export weakness could be a challenge for India as it tries to sustain faster than China growth till 2028. Also, India cannot afford to lose out on exports at a time when the demographic dividends are most favourable to India. A major chunk of the growth in India has come from exports and will continue to come from the exports sector. This could just add to the existing disruptions created by the supply chain blocks in China.

In fact, if you look at the 30 year period between 2028 and 2058 it will be like a golden period for India in terms of demographic advantages. India’s share of working age population will be more than that of China during this entire 30 year period. India can now actually export its way to a higher level of economic growth. The last thing that India would want in these circumstances is a recession spoiling its calculations.