As 86% CEOs gear up for global recession, here’s how it’ll hit Indian households and businesses

Although 58 per cent CEOs feel that the recession will be mild and short, the UN has warned of damage worse than 2008.

FPJ Web DeskUpdated: Wednesday, October 05, 2022, 05:20 PM IST
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Interest rates are being hiked by central banks globally to control rising prices by making borrowing costly, but that will also slow down business growth and cause unemployment, as it triggers a recession. India’s unemployment rate has fallen after hitting a one-year high of 8.3 per cent, but a recession might rob India of jobs as its GDP growth slows down. In a country where the top 10 per cent already control 75 per cent of the wealth, the recession will aggravate inequality. Although 83 per cent CEOs globally are gearing up for what most of them call a mild recession, the UN has warned that it might cause more damage than the crisis of 2008.

An economic storm is closing in

Many are speculating if the possible crash of Swiss bank Credit Suisse, which is losing market confidence after it lost millions in investors’ money, could spark off a recession. Nouriel Roubini, who had predicted the 2008 crisis when most CEOs were caught off guard, has also warned that a long and painful will start by the end of this year. He has cited high debt ratios, caused by too many of company assets coming from borrowed money, as a reason for the downturn, since servicing the debt will become expensive with higher interest rates.

Most execs are still not alarmed

Yet out of more than 1300 CEOs surveyed by KPMG, only 14 per cent consider recession as a pressing concern, which is almost twice the number of execs who thought so at the beginning of 2022. But 73 per cent of them are anticipating a disruption in growth due to the global downturn, and a similar number has deployed precautionary measures. A significant number of CEOs have stopped hiring and are also cutting down their workforce, which might buckle the great resignation trend, which has seen record number of employees quitting for better opportunities.

How long can India resist?

In India, a recession in the US is expected to cause a slump in merchandise exports, and the IT sector will be hit because software exports rely heavily on demand in the US. India can’t remain completely insulated from the effects of a global recession since rate hikes by the US have also triggered a rise in interest rates for India. As for head honchos in India, Anand Mahindra had predicted early on that the pandemic will leave behind a global recession, while Ajay Piramal has said that India won’t be affected significantly.

India survived the 2008 global economic turmoil by cutting interest rates and increasing fiscal spending to provide a stimulus. But in the longer run, the persisting fiscal deficit delivered India’s very own economic crisis in 2013. So holding on to savings, investing in quality assets, and securing employment are some steps that common Indians can take to weather the storm on the horizon.

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