In my opinion, recession for people of India never actually happened as compared to many of us in the US.
India as a transitional economy, is very vibrant, resilient and to some extent, self sustaining. India enjoys the benefits of being a developing country with much-talked domestic growth, staggering internal consumption from its burgeoning 800 million strong middle class and the new spirit of entrepreneurship . So when the economic downturn started in the US two years ago, the India exports were still steady and imports increased marginally. However as the economic condition worsen over the months, it was only in December 2008, every other country felt the ripples as well.
Indian recession was primarily triggered by a mix of couple of factors. First, the global financial meltdown tailored by few at Wall Street brought the entire US credit market down. With Fanney and AIG going down, the two heavy hitters brought jitters to the people at Oval office. Beginning of the year and the unemployment rate grew upto 13%, highest in the history of United States in this modern era. Higher credit crunch, means more layoffs. With more and more people becoming unemployment, the number of expats going back home to India rose sharply. The not-so-much expected “changes” in the fields of money sent by expats to India as remittance exports diminished as the demand globally hit the bottom.
Thanks to the provisions of Stimulus bill and Tarp funds, bad assets were bought out and economic players were freed of the upcoming bankruptcy. In addition to the good work these funds did, they limited the ability to hire American companies foreign nationals. Indian software industry was the worst hit by this. For the ninth year in a row, India has been the top source of sending students to study in the US. Foreign nationals graduating from school, and also who were already here, heavily rely on H1 B visas and the provisions of the Stimulus limited this overflow. Slowly and slowly, as the credit crunch at the Wall street eases, US economy continues to recover from depression bruises.
Less people working in the US means less money sent back home as remittance to India. As a result, the Indian earnings dropped for fiscal year. The world must not forget that US is of course $13 trillion economy and whereas India is expected to reach $2 trillion by 2020. There is a whole lot of dollar gap even if that happens. So developing countries will continue to line up for US’s business. And as more and more companies recover from red lines in the balance sheets, the business will struggle back to come back to it’s “expected state.” This means more business for the countries like India, who depend heavily on imports and are in the process of becoming industrialized nations.
Another important dichotomy to be noted is that, many in the BRIC countries didn’t experience negative growth. Indian economy never went down to a negative number in the recession, however the world’s biggest economies did. Japan, UK, Germany and the US contracted by atleast one percent of their economic size during this recession. At worst, the Indian economy declined to a figure near 6.5 % and NOT negative. So I m very convinced that recession for India never happened.
I could have easily bought the argument that Indian economy slowed down in the midst of the economic meltdown, but recession never came to the people of South east transitional economy.