Advanced economies, particularly the US and the Eurozone, will take the lead in the global recession this year. According to CRISIL’s “The Slowdown Shadow” report, India’s domestic labor-intensive industries, such as textiles, footwear, and leather, are highly dependent on these two regions, rendering them particularly vulnerable to a slowdown in these advanced nations.

It is clear that many of the export commodities have an excessively high dependence on these areas. For instance, India sells 46.2 percent of its leather and 42.7 percent of its footwear to the European Union (EU). The US also controls a sizable portion of products derived from textiles and trash.

The two regions export a number of similar goods, and their combined share is disproportionately substantial for things like textiles, including both unfinished and finished goods (RMGs). According to the CRISIL analysis, local exporters are sensitive to a slowdown in these two regions’ economies due to the significant concentration of their exports (particularly to discretionary goods like textiles and leather products).

Over time, India’s growth cycles have closely mirrored those of advanced nations. Reduced demand for Indian products abroad will be the most significant and immediate effect of this. At 18% and 15.4%, respectively, of India’s merchandise exports in fiscal 2022, the US and EU are two of the top export destinations. With the exception of a modest increase in November and December, which could be a temporary blip, shipments to these two regions have been dropping since July 2022. a reflection of holiday demand as the year comes to a close.

In 2023, when the peak effects of synchronised monetary policy tightening across major economies appear, it is predicted that global economic activity will slow down. When they vigorously pursued monetary tightening in 2022, advanced economies are anticipated to take the worst hit.

In its November 2022 outlook, S&P Global predicted that after peaking at 3.4% in 2022, global growth would decline to 2.2% this year, with the US economy shrinking by 0.1% and the eurozone remaining flat in the base scenario.