10 Best Reasons Why India May or May Not Face Recession Post Covid
Mainak Ghosal*
Published: August 06, 2022
Abstract
Just a few days ago former IMF Chief Economist Ken Rogoff predicted that the USA will plunge into recession due to supply shocks from the ongoing war in Ukraine and the inflation crisis adding to it. Also, the World Bank chief, David Malpass had said that the ongoing inflation might last for two years and some countries will find it ‘very hard’ to avoid recession. But what will happen to India due to this catastrophe? We all know that when the US sneezes, the world catches a cold - which means that a recession in the US will leave a cascading effect on other economies like what happened in the aftermath of the 2008 US Housing crisis.
But the question is what exactly is ‘Recession’& how does it crop up? According to the National Bureau of Economic Research (NBER), it is a situation when the GDP of any economy remains negative for two consecutive quarters. When Covid appeared, the money supply drastically dwindled which affected the purchasing power of the common man. To counteract this, the US increased its liquidity in the market, which in turn increased the Demand much above that of the existing Supply rate thus causing inflation. To control inflation, Central Bank increases the interest rates to match the unequal Demand = Supply situation.