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How US Recession Will Affect India ?

How US Recession Will Affect India ?

Arun R's photo
Arun R
·Dec 6, 2022·

4 min read

In recent times you might hear that Facebook has laid off 11 thousand employees, Twitter laid off 4000 employees and Amazon is in talks to lay off 10,000 employees, And the reason behind the massive layoffs is the Recession. Yeah, you would be coming across the word ‘recession’ a lot in the past few months. In this article, we are going to get deep dive about recession, what is a recession, recession factors, How United States Recession will affect India and how to be in a safe zone during the recession, Let’s Start:-

What is the Recession?

A recession is a significant period of economic decline, normally recession is calculated by a decrease in GDP for three or more quarters of the dip in** GDP**. In simple terms, recession means it's a slowdown of trade, It happens due to some main factors like unemployment, increase in interest rates, Inflation, Dip in the stock market, Drop in the real estate and trading sector and Money devaluation, Previous the recession has taken place in 1975, 1982, 1991, 2009 which tends to massive layoffs on those times.

Recession vs Depression

Recession is a downward trend in the business cycle which is done by the decline in production of employment, recession makes a delay in large investments and delays in purchases, recession can be limited to a single country

Depression is a major downswing in the business cycle, depression is characterized by widespread unemployment and a dip in trade and capital movements, depression can have a global reach

In simple terms, the continuous lasting of a recession leads to a Depression

Effects of the Recession?

A yield curve is basically a graph line of bond yield rates that shows how the interest rate of bonds changes depending on the length of their maturity. here to know about bonds we take a real-world example, consider yourself a Millionaire and you wanna make money using CCI (currency carry trade ), the first step in CCI you will get to know the data of lending rates in US banks and the bond market in India, where the US banks lend an interest of 2% and Indian bonds run on the interest of 4% means - it's a profitable market for CCI

Now you will get 1 million USD from Us banks and convert it into rupees, consider it as 7 crores where you leave it in bonds for one year so that you will get interest of 28 L, by doing the same conversion process, you will get the profit of 14L rs after paying the interest to US banks by just rotating the money and in recession, if the banks increase the interest rates you will have to pay more amount of profit as interest. Currently, FED has increased the interest rate by 0.75 % which indicates the inflammation, When FED increases interest currency carry trade becomes risky.

Concluding with…

Definitely, Recession affects every sector globally, Let’s see about the IT industry now - Indian IT industry contributes around 8% of India's GDP and employs around 4.5 million people but the issue is our tech industry is more dependent on the services and projects of the United States and Europe, both of them together contribute around 85% of Indian IT firms revenue. Since Europe has been in a financial crisis for the past 2 quarters if the US joins them it will lead to heavy damage to India’s service-based companies.

To be on the safer side we need to follow some simple basic things - the first mandatory one is to save. experts predict that a recession may last up to 8 months, Having emergency funds, Minimization spending, trying to invest more in assets like gold and Ease to liquefy assets plan and making proper Insurance, avoiding locking huge amounts of money into buying luxury products, And the most important thing is Upskilling yourself makes you sustainable in the competitive IT environment, In our upcoming article, we will go through about some Unicorn companies which can be affected by the recession.

Also, Read Our Article:

https://blog.skillsafari.in/the-rise-and-downfall-of-ed-tech-companys-in-india

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