us recession: Deeper US recession spells big trouble for India, says Swaminathan Aiyar

“There is not the slightest chance that the world has a hard landing and India does not. We are only 7% of the global economy; the idea that we will stand out is a fantasy to me,” says Swaminathan Aiyar, Consulting Editor, ET NOW in an interaction with Tamanna Inamdar. Edited excerpts:


How worried should we be about the US going into recession?
We should be very worried; there are actually two recessionary scenarios. In the first quarter of this calendar year, United States’ economy was minus 1.5% GDP. The second quarter figures are not out yet, and it is possible they will also be negative. This would mean that we have already had a recession in the first half of 2022 but that would be a mild recession from which there may be some kind of a comeback in the third quarter. But beyond that, if the Fed keeps increasing its interest rates, it will create a much deeper recession by the end of this year or in 2023.

So, currently what has happened in the first half is that we may have seen a very very mild recession, which is not a serious issue. There has been a slowdown in the world economy, no doubt about it, but if this is all and we do a little better, it would be a very bearable thing. The real problem we face is what happens six months or nine months down the road. It is entirely possible that if the Fed keeps raising interest rates, it can spark a recession in the USA by squeezing activity. At the same time, the rise in interest rates by the Fed can spark an enormous flow…