Global Recession: In view of rising inflation, central banks around the world are increasing policy rates. Generally, central banks take this step to control inflation by absorbing cash from the market. Taking loan from banks also becomes expensive after the increase in policy rates. This affects the spending of the people and decreases the demand in the market, due to which there is a gradual moderation in inflation. Now let’s talk about the US Federal Reserve (US FED), whose Federal Open Market Committee (FOMC) meeting is being held on 20 and 21 September and in view of inflation, a decision has to be taken to increase interest rates. If the trend of increasing interest rates continues like this, then the possibility of recession cannot be ruled out. The World Bank has also expressed its apprehension about this in its report.
Why did the World Bank warn about recession?
In a report released on September 15, the World Bank has expressed apprehension that if this trend of increasing interest rates by central banks continues, then the possibility of recession in 2023 cannot be ruled out. The World Bank has said that during the last five decades, central banks did not increase rates in this way to control inflation.
The World Bank has said in its report that the global economy is moving in the direction of slowdown very fast. Citing a study, the World Bank has said that the world’s 3 largest economies – America, China and European countries are moving towards economic slowdown at the fastest rate.
Due to the strength of the dollar, the currencies of other countries fall.
Global economies are linked to each other. Most international business is done in dollar denomination. When the dollar strengthens, it has a significant impact on other economies and markets as well. You have already seen the condition of the rupee against the dollar, which had also crossed the level of 80 recently. Japan’s currency yen and the world’s second largest economy, China’s yuan, are also no exception to this.
Global growth may be 0.5 percent next year – World Bank
In view of the way central banks around the world are increasing rates to control inflation, the World Bank has estimated that it may increase by an additional 2 percent. In such a situation, the global GDP growth may come down to 0.5 percent next year. If we look at this decline on a per capita basis, then it can be 0.4 percent and technically it can be named as a global recession.
What will happen to India if recession hits
PwC has presented a frightening picture in its recent report. In a survey conducted on business risk management in the US, 50 percent of people said that they are considering cutting the workforce. Talking about India, 25,000 start-up workers have lost their jobs since the corona virus hit. This year alone, more than 12,000 people have been fired. This is one side of the coin. Let’s also look at the other side.
Dr. Satchidanand Shukla, Chief Economist, Mahindra Group says that the experience of mild recession in the last 2-3 times was positive for India after a few quarters. There is no doubt that in the event of a global recession, the export and financial sector of our country will not be affected. However, Shukla says that in the event of a recession, the goods we import from abroad become cheap. For example, crude oil and other commodities. While the economies of the world are in negative or their growth is very low, India will be able to attract global capital even if the growth remains at 6 per cent.
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