Economic policymakers must look west

The turbulence in West Asia can jeopardise the nascent economic recovery
This has also spooked financial markets, with the BSE Sensex falling by 1.9% on Monday(PTI)
This has also spooked financial markets, with the BSE Sensex falling by 1.9% on Monday(PTI)
Updated on Jan 06, 2020 08:37 PM IST
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Hindustan Times | By

The Indian economy has been caught in a prolonged deceleration with GDP growth falling for six consecutive quarters. While the December quarter GDP numbers are yet to be released, the economy has been showing some early signs of recovery. The Purchasing Managers’ Index for both manufacturing and services in December have shown improvement. Goods and Services Tax (GST) collections were more than 1 lakh crore for the second consecutive time in December.

Even as this nascent recovery is underway, external headwinds in the global economy could put it in jeopardy. A US drone attack, which has killed Qasem Soleimani, a top Iranian general, has made the West Asia more unstable. Given the fact that this is also the world’s biggest oil producing region, crude prices have increased $3.8/barrel in the last two days. This has also spooked financial markets, with the BSE Sensex falling by 1.9% on Monday. If West Asia slides into a military conflict, it will adversely affect the Indian economy through higher oil prices, a weaker rupee and a squeeze on remittances, which over eight million Indians working in the regions send back. Economic policymakers will do well to maintain a close watch on the external situation.

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Friday, January 28, 2022