If you happen to be an economic expert, you would already know the answer to the question, “Will recession hit India?”. The answer in one deep tone happens to be “yes” because no nation is immune from recession.
While some consider themselves well-prepared for any recession, the truth is that no one is well-prepared in advance when a nation’s economy is in dire straits.
Like the economy, a recession indicates an upswing, downswing and a refusal to move in either direction. That’s the ‘normal’, and one of the ways to predict a recession would be to review the past historical data, especially the economic indicators.
As for the query, “Will recession hit India?”. – the answer is dependent on a lot of factors. And that’s all the more reason you need to review this op-ed since you can study some of the critical factors causing recession worldwide!
It must be pointed out that recession can also set in due to unexpected terrorist attacks and even a war being declared on one’s borders. While these factors can cause a recession in your country, that does not mean that recession has finally set in.
Several nations had to fight several skirmishes on their borders, and some even declared wars to protect their borders. What should be mentioned is the fact that despite these terrorist skirmishes and battles, the economy of these nations was not affected much. Just take a look at some of the factors causing the recession today.
Causes of recession
When it comes to a recession, a fall in the nation’s gross domestic product or GDP is often quoted as one of the leading causes of a recession.
When you take a closer look at the event, you are bound to discover several factors instrumental in causing the recession in the first place. Please review the rest of the op-ed to understand better what recession is and what causes it.
- Loss of confidence in the economy:
When it comes to a recession, the lack of confidence in the nation’s economy is often quoted as one of the primary drivers behind a recession.
The public has lost faith in the economy and, as a result, has decided not to make any more purchases in the market. This consumer behaviour can have wide-reaching ramifications to affect a nation’s industrial output.
- High-interest rates:
One of the critical indicators of a recession is high-interest rates. At times, even these high-interest rates, usually hiked up by the country’s Reserve bank to combat stagflation, can, instead, cause a recession if effective counters are not employed. That’s what happened in the US during the early 1980s.
As a result of the Fed’s move to hike the interest rates to combat stagflation, it ended up causing a massive recession.
One of the side effects of hiking a currency’s interest rates is that it serves to mop up the extra liquidity from the market. As a result, borrowing rates, including retail prices to house mortgage rates, tend to get more expensive in the near term.
Even the recession that set in Moscow post-Gorbachev was more because of the rapid economic policy changes rather than any perestroika movement or a leadership vacuum. It resulted in a shakedown effect, with a deep recession, high-interest rates, exorbitant house mortgage rates, and equally high retail rates on most produce.
It took a while for the Russian economy to recover, with the government trying several measures, including lowering interest rates, to combat the recession. Eventually, the recession was done with, but its impact can be seen today, as most Russians have started to hoard bare essentials.
- Stock market crash:
Stock markets crash now and then -the stock market crash in the US in 1919 even caused a country-wide depression. These days, governments carefully monitor the stock markets, currency exchanges, and bitcoin markets, including markets that deal with various products.
They know that several investors would love nothing more than to profit by bottoming out the market price of a commodity or a currency.
There’s nothing wrong with that except that it is considered highly illegal in some circles. Either way, the government monitors all the indicators of the stock and currency markets and often keeps an eye out on the currently available liquidity. But despite a government’s best efforts, stock markets can crash, and when they do, they can put the brakes on the economy.
These are some of the common factors behind a country’s recession. And when it comes to India, these same reasons still apply – as India is governed by democracy rather than autocracy like China. So when it comes to a recession, there is not much you can do but ride the effects of one and try to minimize its effects simultaneously.
It’s a trade-off; since India tends to be a democratic nation, governments worldwide are more than happy to help. The same cannot be said of an autocratic nation like China. And as to the query, “Will recession Hit India” the answer resoundingly happens to be “Yes”. It is merely a question of “When” and not “If”.
