Recession storm clouds are gathering over the West, but there’s a silver lining for India.
Let’s look at the repercussions of it first.
Energy Sector Brew
Reliance Industries, the owner of the world’s largest refining complex, announced a lower-than-expected profit.
The likeliness of pinching operating expenses due to soaring freight and input prices grows.
Raw material costs jumped 76% in the June quarter.
The recession in the offing will also surge food and energy prices.
The slowing capital flows to emerging markets, the ongoing pandemic, and a slowdown in China is making matters worse.
Seize The Moment
At a time when Western buyers were shunning Russian imports, Reliance procured cheaper Russian oil and sold it at higher prices.
The benefits seem to be fading out now.
The fear of a global slowdown may also dampen the demand for fuels.
On July 1, India slapped a windfall tax of Rs.13/litre and Rs.6/litre on diesel and gasoline exports, respectively.
This was done to limit the extraordinary profits of private refiners like RIL.
However, 19 days later, the move was scrapped as global crude prices moved to a lower “band” and refining spreads of domestic fuel companies declined in India.
From the Great Resignation to Greater Layoffs
A closer look shows us signs of stagflation in plummeting profitability of IT firms.
The US market contributes 40% to the revenues of Indian IT firms.
An enormous part flows in from the UK, Germany, and France.
If recession strikes, IT spending prices in firms like HCL, Infosys, and TCS will be lowered.
Choppy days lie ahead, and it’s already giving us jitters!
Google has informed staff about a hiring slowdown this year, citing that they need to be more entrepreneurial now.
Microsoft, Coinbase, and Netflix have laid off workers.
We’ve got Meta freezing its hiring.
For Indian IT firms, in the likelihood of the economy shrinking, there’s reason to be optimistic too.
Infosys reported a cheery forecast of 14%-16% annual revenue growth while managing to boost its rupee earnings by just over 3% from a year earlier.
Moreover, there’s reason to believe that the deal pipeline isn’t drying up. US and European firms — from banking, manufacturing, and retail to health care and utilities — are still entering offshoring contracts, particularly those that will help them automate processes to cut costs.
Too long? Here’s a one-liner: A possible global recession could show its colors in India soon; the energy, food, and IT sectors are likely to be heavily hit.