India recession: Is the risk of a recession in India imminent?

As central banks wind back the pandemic-era measures which were intended to support growth during an economic downturn, the fears of a prolonged recession have emerged fuelled by a sharp uptick in inflationary pressures and poor demand recovery. Add to this the Covid situation in China and the Russia-Ukraine war, the global economy is in a vexing position.

Generally speaking, India would enter a ‘technical recession’ when it sees two consequent quarters of GDP decline. Cambridge, USA-based National Bureau of Economic Research (NBER) however, defines a recession as a ‘significant decline in economic activity that is spread across the economy and that lasts more than a few months.’

In a conversation with
ET Online, global research firm Nomura’s Sonal Varma, Chief Economist – India and Asia ex-Japan, said that amid the current geopolitical developments and central banks’ policy rollback, India may see an economic slowdown in the medium term.

“There is a risk that if the export cycle globally slows and domestic policy is tightened then over the next 12-18 months we could see a slowdown in India. It is not a recession, but growth slowdown risk is definitely more elevated from the medium-term perspective, i.e, in the next 12-18 months,” Varma said.

In recent weeks, analysts have flagged the rising risk of a recession in the United States as the Federal Reserve aggressively rolls back its ultra-accommodative to tame the rising inflation.

Bank of America’s…