US Recession Could Have Spillover Effect On Indian Economy, Says Nomura

GDP of India: Nomura has fixed India's GDP growth rate at 7.2 per cent in 2022. However, in 2023, India will grow by 5.4 per cent, it stated

New Delhi: The US economy is going through a growth slowdown. The ill effects of the slowdown impact the growth of the Indian economy as well. According to a latest note by research firm Nomura, the ‘prolonged mild recession’ in the US can also lead to a slowdown in India, which has been recovering to a pre-pandemic level. Economic Time reported that Nomura released its Nomura India Normalization Index (NINI) to track the growth of various sectors in India.

As per the index, the service sector in India is above 40 pp as compared to the pre-pandemic level. The country is seeing a broad-based improvement across almost all the sectors including consumption, investment, industry and the external sector.

Some of the areas that could worsen the economy’s growth are negative sentiment shock for consumers, supply chain disruptions, worsening energy availability and tighter financial conditions.

The report was quoted as saying, “When combined with elevated levels of inflation that is eroding consumption growth and the growth sacrifice from tighter financial conditions, suggests a broader growth slowdown for India over the medium term.”

Growth forecast at 7.2 per cent

Nomura has fixed India’s GDP growth rate at 7.2 per cent in 2022. However, in 2023, India will grow by 5.4 per cent, it stated. The rate hike by the Federal Reserve can also leave to a dampening the investors’ spirit.

On Wednesday, Fed Chair Jerome Powell said that it might be difficult to ensure a soft landing in the economy. Soft landing happens when the inflation rate in the economy comes down without hurting other factors like liquidity in the economy and deficits.