Outlook of Indian economy in the global economic scenario

Recession – the dreaded subject the world is talking about. Be it commodities getting costlier or travelling becoming expensive despite fall in oil prices, pink slips being rampant – the blame is on Recession. Is recession in India actually as bad as it has been made out to be?

Last year as recession dealt heavy blows to the global economy marking an end to an era of cheap money, developed countries slowed down on consumer spending. They also registered huge job losses and investment meltdown. This had an impact on emerging economies like India, where fall in demand led to dip in exports. Forex reserves declined by $56 billion. Rupee depreciated by 20% making exports expensive. Slowdown in foreign investments had adverse effect on liquidity and investments too. The stock indices showed BSE registering a fall of 54.5% at 9,647 from its peak of 21,206 in 2008.

However, despite this economic slowdown, India is expected to do a GDP growth of 6-7% in 2009-10. This is lower than the 9.7% in 2006 and 9% in 2007, but when compared to industrial countries and emerging markets, it is the second highest after China. According to reports by leading venture capitalists, India is holding on well as compared to other emerging countries, especially the other two BRIC nations – Brazil and Russia.

India, being a consumer driven country, has a very big advantage – the large working force. A study by Nomura Research Institute Asian Perspective shows that over 50 crore people are below the age of 30 and those between the age group of 20-59 will grow in next few years to give demographic dividend. These groups will fuel higher demands and growth leading to rise in household incomes, in turn leading to more savings and ultimately to a higher GDP. Currently, household income contributes 68% to the total savings that make up for 38.4% of GDP. This signifies that it will not be long before India recovers from this economic crisis.

A study conducted by AC Nielsen suggests that 83% believe the economy will get better in the next year. Overall, the mood is optimistic but till the time India actually gains back economic momentum, Indians will have to exhibit a certain amount of resilience.