The current crisis that eurozone is going through, with Greece, Ireland and Portugal engulfed into it, how much India is safe from that? The question is being asked by most of the economist, ppoliticians and policy-makes and hardly anyone has any kind of realistic answer. Italy might join the list with Spain might kiss the default too. This was componded with Last week's downgrade of US ratings by S&P. So what is in store for India? Is the world heading towards double dip recession?
Recession is a word word, both for the economist aswells as the policymakers, politicians. The Obama government will try hard to not let the US slip into the red territory. But what happens if the Us grows very slow. That is stark reality and will have a serious impact. Firstly, the Indian IT comaies will take a bad hit, with most of the exports being driven by the US govt. Already GE is planning to halve its IT spending sending chills accross the companies like TCS. A bad mood in US means bad for the textile industry, with small scale industries in Tirupur taking a hit.
But the worst part is that the crisis has emerged in Eurozone this time. And a financiam union with no political union can mean that hte solution to the Eurozone crisis will have a lot of hurdles to be passed. Recently with Germany slowing down sharply, the abitility for the ECB to buy out the Italian and Spanish bonds in near future comes in doubt. A lack of total financial solution might drag the big weights like France and Germany. In this scenario UK finds itself in a no-mans land type situation. On one hand, it is at distance from the Euro woes but its internal debt/GDP problem remains. So a possibility that Eurozone might get a straw of help from UK is a less likely possibility.
More global effects will be price of commodities A nervous investor will try to find the safe haven in gold, pushing up the price of gold. Inda the largest gold consumer of the world will also be hit by the sky rocketing price. Crude will also be quite mixed, as teh damp demand from US and the EU will push it down. Asian countries will feel the pinch this time, as a second crisis will be too much to handle for already a stretched economies. At the start of 2008 financial crisis, the aisan economies were in a better position as the inflation headache was not that big that time. This time China and India are both reeling under record inflation, forcing their central banks to take severe measures to reduce the exess cash in the exonomy. In these situations, most of the Financial experts are giving thier opinion which might be proved wrong again. Its only the time that can tell as current financial models are not that sophisticated to analyze-understand-predict any financial storms.
