Explained: With layoffs and recession haunting the world, here’s where India stands

After empty offices and economic uncertainty during the pandemic, the world was looking forward to a recovery, just when war and inflation paved the way for a recession on the horizon. With a painful slowdown approaching in 2023, the strong US tech sector is already rattled by falling ad revenues, and has started laying off thousands. Although new age digital startups in India have also had to fire people due to a fund crunch, major firms such as Tata are hiring more people, including those laid off at Meta and Twitter at Jaguar Land Rover.

Can India defy the headwinds?

Indian IT firms are also calling people back to office, while tackling the new issues of moonlighting that emerged from the work from home trend. These development lend credibility to claims that India will only face partial recession, and will be able to whether the storm just around the corner. Even in 2008, as the world was hit by a crisis triggered when the US housing mortgage market collapsed like a house of cards, India survived by reducing interest rates and increasing fiscal expenditure.

How RBI is doing things differently

In the current climate, the US Federal Reserve is aggressively hiking interest rates to control cashflow to reduce demand and hence prices. But that makes borrowing more expensive and affects business growth by affecting capital expenditure and investment. This is why the choice is between high prices due to uncontrolled inflation, and a long recession.

India’s banking regulator the RBI on the other hand, is prioritising business growth, and is keeping the hikes lighter despite increasing interest rates. Despite borrowing getting costlier, Indians continued to access credit to splurge during the festival season. The inflation on the other hand, did come down, but stayed above the 6 per cent target set by the RBI, while banks enjoyed credit growth, even as deposits haven’t gone up.

What the experts are saying

India’s own officials such as RBI Governor Shaktikanta Das and Niti Aayog Vice-Chairman Rajiv Kumar, have said that India has low risk of inflation, and will grow at 7 per cent. Apart from them, global monetary body the IMF has also said that India is doing better than most developed economies in this crisis, despite slashing the country’s growth forecast. Moves such as defying pressure to buy discounted oil from Russia, among others to control inflation, may have contributed to this.

Bottomline and reality check

So far India seems better positioned than most countries, and most sectors including tech are confident about growth. Salaries are also on the rise in the corporate sector, although that could be attributed to attrition rates.

But in 2008, the moves to survive a global downturn had caused pressure on the Indian economy in 2013. But if India makes the most of a recovery post the global recession which it will survive, things can be different.

Published on: Monday, November 21, 2022, 10:03 PM IST