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World Economies in Recession and Impact on India



  Feb 20, 2024

World Economies in Recession and Impact on India



What is a technical recession?

A technical recession occurs when an economy experiences two consecutive quarters of negative growth in GDP. This indicates a significant slowdown in economic activity across various sectors.

Which major economies are currently facing a contraction?

As of 2024, Japan and the UK have entered a technical recession, and Germany is also facing an economic contraction. These developments signal challenges in some of the world’s largest economies.

How does the economic contraction in these countries affect India?

India is likely to be negatively affected due to its economic ties with these countries. The contraction could lead to reduced demand for Indian exports, fluctuations in investment flows, and overall impacts on global economic sentiments which can influence India’s economic growth and foreign direct investment (FDI).

Why is domestic demand important for India in 2024?

With the global economic slowdown, India needs to rely more on domestic demand to sustain its economic growth. Domestic demand includes consumption and investment within the country, which can help offset the impact of reduced global demand on Indian exports and economic activities.

What has been the trend in Foreign Direct Investment (FDI) in India?

FDI in India during the first half of the 2023-2024 financial year has been the lowest in 16 years, indicating a cautious approach from foreign investors possibly due to the global economic situation and other factors influencing investor confidence in the Indian market.

How has the private sector investment trended in India?

Private sector investment in India has been facing a downward trend as a proportion of GDP since 2012. Despite increases in absolute terms, the proportion of private sector investment to India’s GDP has been declining, reflecting challenges in the investment climate.

What impact does the global economic slowdown have on investments in India?

The global economic slowdown, particularly the contraction in major economies, is likely to depress investments in India further. Investors may adopt a cautious stance, affecting the inflow of capital into the country, including from sources looking to diversify away from China.

How is the retail sector performing in India amidst these challenges?

The retail sector in India is experiencing a slowdown, with growth in discretionary retail sales decelerating and same-store sales growth showing minimal increases. This slowdown reflects subdued domestic demand for consumer goods, which can further impact the overall economic momentum.


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