Trumpcession: How the Impact of U.S. Recession on India Could Change Everything (Part 2)

In Part 1, we talked about the growing concerns of a potential U.S. recession. Now, let's look at how this could impact India. India's markets recently enjoyed a spectacular bull run from March 2023 through September 2024, with the Nifty surging by roughly 50%. Great returns for investors, right? However, the late 2024 correction, coupled with an increasingly complex global geopolitical landscape, has led to uncertainties in the market. As the U.S. flirts with recession and international tensions remain high, India's economy finds itself at a critical juncture.

How exactly could a U.S. recession affect India?

Well, it could trigger several immediate challenges. For starters, we might see significant Foreign Institutional Investor (FII) outflows, potentially exceeding the ₹1 lakh crore already withdrawn. A stronger USD would push investors towards gold, while Indian exports might see a short-term boost from lower costs, but import costs would simultaneously rise. Historically, external shocks hit India's GDP growth trends, suggesting a complex, but potentially earlier, impact.

Remember the 2008 U.S. recession?

It offers a stark reminder of India's vulnerability to U.S. economic downturns. While the causes of a potential future downturn may differ, the core question remains: how exposed is India today? To answer this, we must examine the current global landscape, specifically focusing on export data and the performance of U.S.-dependent sectors like IT and pharmaceuticals.