Is The Developed World Going To Face Recession? How Should India Prepare?

Almost everyday well circulated newspapers around the world are reportedly pointing out that the US and most of the countries in the Eurozone are going to face economic recession in the coming quarters.

- Kishore Kumar Biswas

Quite a number of agencies including the IMF and many economists are not very sure about the economic prosperity of these countries. Even China and many other prosperous economies of Asia may face slowdown. At the same time, there are some signs that may be considered favourable to maintain economic stability.

The US and European economies

First, it is reported that the US stocks have posted their worst first half in about 50 years. The stock market performance is the worst in Europe as well, since the last global financial crisis of 2007-08. But the worst may not be over for the US and Europe. This is because the investors have been worried about hiking interest rates by the central banks of their respective countries. Most of the central banks have been trying to control inflation in their respective countries by raising policy rates. Secondly, the rising energy and food prices in Europe and the US have been a major risk of inciting inflation. So, the US Federal Reserve may have to tighten money supply even at a time when the economy is struggling with several headwinds arising out of the Russia and Ukraine conflict and the Covid-19 pandemic which would further stoke inflation. In that situation, the economy may go into recession.

Some hopeful factors