Amid growing concerns about a potential global economic slowdown, experts caution that it is too early to predict a full-scale recession. The primary factor fueling these fears is the United States’ plan to impose higher tariffs on imports, a move that could significantly impact global trade, supply chains, and overall economic growth.
Madan Sabnavis, Chief Economist at Bank of Baroda, said that these tariffs could influence inflation and slow down the easing policies of central banks worldwide. While most central banks are currently focused on stimulating growth through interest rate cuts, a rise in tariffs could disrupt these efforts. Countries with export-driven economies would be particularly vulnerable, facing potential slowdowns due to reduced global trade opportunities.
“Countries more dependent on exports will face challenges as their growth will be affected. India, being a domestic-oriented economy, will be buffered to a large extent on the growth front, though it will still be impacted by sharp currency volatility,” Sabnavis said.
Ajay Bagga, a banking and global markets expert, warned that widespread tariff disruptions could be severe enough to push some regions into negative growth. He said that in today’s interconnected economy, production chains span multiple countries, making them highly sensitive to trade restrictions. Raw materials sourced from one country may be processed in another and assembled in different locations, meaning any disruption could ripple across the global economy.
“Such disruptions could prove to be severe enough to tip some regions into degrowth and recession. The Atlanta Fed GDP Now forecast for the U.S. for the first quarter of 2025 is already showing a negative print of -2.4%. This highlights the potential impact of widespread tariff disruptions,” Bagga added.
Despite rising global uncertainty, economists believe India may be relatively shielded from the worst effects of a slowdown. As a largely domestic-driven economy, India is less dependent on exports compared to many other nations.
However, Sabnavis cautioned that India is not entirely immune to global economic trends. The rupee could face significant volatility due to uncertainties in global markets, posing challenges for businesses engaged in international trade.
While it remains uncertain whether the world will slip into a recession, the risks are growing. If the proposed U.S. tariffs come into effect in April as planned, they could further slow global economies.
India may not bear the full brunt of these disruptions, but it will still need to navigate currency fluctuations and heightened global economic uncertainty in the months ahead.
–ANI
