Deloitte’s "Dconomics" warns of severe impact of possible US recession on India

According to a new report by global consulting firm Deloitte Tohm,atsu and Touche, recession in the US would mean a significant slowdown for India's exports along with higher interest rates, instability in financial markets, high unemployment and lower growth.

In the wake of global integration, Indian economy has grown more dependent on the US as was evident from the fact that the US was the second-favoured destination for exports and the third-largest source of FDI inflows in India, Deloitte's "Dconomomics" report said.

"With such deep interconnectedness through trade, finance and confidence channels, it would be naive to presume that India will be unaffected by the developments in the US economy," the report said.

Given the high degree of global financial integration, any reduction in US balance of trade would negatively impact many countries, with a depreciated dollar diminishing the value of reserves held by various countries, including India.

This would also impact the import capabilities of various countries, as their import appetite would be dependent on the US dollar, as also the value of international forex reserves.

However, on a positive note, the report said it was ''possible that the buoyancy in agricultural sector growth, major infrastructure investments, improvements in manufacturing sector yields and the robust services sector may help India weather the negative repercussions that may arise from the US," the report said.