US Recession and the World Catches a Cold

As slow down in US economy is expected to turn into recession soon, impulse of export led growth through spill over of consumption splurge through housing sector boom as a result of sub prime lending, has been receding. Indian Economy once achieved 9% economic growth in the recent past, is now facing threat of contraction of rate of growth of output and employment as an immediate effect of US recession. Indian economy may attract high inflows of FDI causing high inflation, slow down of exports oriented sectors such as IT, IT-enabled services BPO, financial services, healthcare, textiles, jewellery, handicrafts and leather goods. In the long term Indian economy can experience stable growth provided India implements effective monetary policy to control and make use of large influx of FDI, and Indian exports diverted to European, African and other Asian markets. Since this recession is predicted to last for about 2-3 years, companies may prepare themselves to reap early benefits of recovery of the world economy. Meanwhile they could invest in up gradation of technology, market development and supply chain links in the period of recession, as the strategy of preparedness for ensuring recovery.