Globalisation is a two-way street. When the world’s largest economy- the US economy undergoes recession, you and me far away in India are bound to bear the brunt.
“When there would be some cut in IT spending in the US, demand for outsourcing jobs in India will be impacted. People working in auto components business will too be affected. The rate of job creation will slow down,” said Abheek Barua, Chief Economist, HDFC Bank.
The Indian middle class is an active contributor to technology outsourcing and exports sector and any reduction in their monthly income and job cut would ultimately affect their spending powers, causing a slowdown here.
“Demand for workers will not grow at the same pace as it grew last year and this is not good for the Indian economy,” Barua added.
The recession in the US is also not good for the small investors. Unless there is clarity as to where the US economy is heading, FIIs (foreign institutional investors) will stay away from the Indian market and stock prices are unlikely to appreciate like they did last year.
“A small investor will be struck with his stocks. His wealth will not increase or appreciate as it did last year when there were record investments from FIIs,” said Barua.Recent developments in the US and its aftermath on the Indian equity markets have made many small investors poorer by lakhs of rupees. The portfolio of Mumbai resident Rohit Sharma was valued at Rs 50 lakh in December on his principal investment of Rs 11 lakh. Now with the market meltdown his wealth has eroded to less than Rs 4 lakh. “ I don’t know what to do. I have become a pauper,” Sharma said adding, “ I should have exited in December.”