Then, there are over 8,000 sanctions ruining the West more than they seem to be hurting Russia. Sanctions are not new to Russia. After its annexation of Crimea in 2014, Russia under Vladimir Putin made a concerted effort to make its economy self-reliant and independent of the West. The war in Ukraine too was hardly a sudden event. It has been building up for years, and was given the go-ahead only after Putin was convinced that his country could weather the onslaught of an economic war that would subsequently be waged against Russia.
Take this for instance: The International Monetary Fund’s ‘World Economic Outlook’ report recently found that Russia’s economy is holding up better than expected despite being hit by a mountain of sanctions. Resultantly, it cut down the predicted growth rates for almost every country, but upgraded Russia’s economic forecast. In April, the IMF had predicted an 8.5% contraction of the Russian economy. Now, that figure has seen an improvement of an impressive 2.5%, leading to the revised rate of contraction in Russia standing at 6%. In months to come, the figure might just improve even more if global energy prices fail to come down – filling Russian coffers despite a supposed loss of Western markets for Russian oil.
The West’s Race Towards Recession
In the West, it’s truly a race for who enters recession first. At the moment, the United States seems to be pacing ahead, but Europe is not very far behind. The world’s largest economy is now ‘technically’ in a recession, even though Joe Biden and his administration are reluctant to admit the same. In 2022 alone, the United States’ economy has witnessed two consecutive quarters of contraction. In the first quarter, the U.S. economy contracted by 1.6% in terms of GDP. In numbers released on Thursday, the United States’ economy contracted by another 0.9% between April and June.
|Bloomberg Global Economic Recession Survey 2022
Europe, meanwhile, is reeling under intense stress caused due to Russia’s erratic natural gas supplies for the past few months. First, gas supplies to Europe via the Nord Stream 1 were reduced to 40 per cent of the pipeline’s total capacity. Then, Moscow went on to pause supplies completely for close to ten days in July, before restoring them. Europe breathed a sigh of relief. Their joy was short lived, as Moscow has again cut down supply via the pipeline to 20 per cent of its total capacity.
Now, Germany is facing an energy crisis, while countries all across the eurozone are scrambling to fill their natural gas reserves. Without such reserves, Europe will unwind like an uncontrollable spiral in the winter months. In any case, the coming months are going to take a heavy toll on Europe’s economy. Eurozone inflation has now soared to a record 8.9 per cent, while economic growth in the second quarter has been recorded at 0.7 per cent. How long before Europe too slips into negative growth?
So, inflation is soaring, the purchasing power of consumers is nosediving and industries are on the brink of seeing their output take big hits as an energy crisis threatens the bloc’s economic stability. In case the energy crunch becomes too severe to bear, European countries will cut supplies to industries first. The economy, as a result, will be the first one to suffer.
According to Bloomberg surveys, Europe faces a recession threat as high as 55% over the next year. The same survey has predicted a near 40 per cent chance of the United States slipping into recession over the next year. China, Taiwan and Australia have a 20 per cent chance of slipping into recession, while New Zealand is threatened by a 33 per cent risk of economic doom.
India’s Economy Stands Strong In Tough Times
The same Bloomberg survey has made a really positive observation regarding the economic climate in India. There is a zero per cent chance of India slipping into a recession any time soon. Researchers involved in the Bloomberg survey have noted that despite the rupee breaching the 80-per-dollar mark against the U.S. dollar, India’s chances of recession are quite low.
|Prime Minister Shri Narendra Modi during Independence Day 2019 speech from Red Fort
Sure, the IMF has lowered India’s economic growth forecast for the current fiscal to 7.4 per cent from the 8.2 per cent estimated in April. However, India will remain one of the fastest growing key economies globally in 2022-23 as well as 2023-24.
A lot has been said about India’s dream to have a $5 trillion economy. Prime Minister Narendra Modi has himself been a vocal advocate for this goal to be fulfilled with the help of every Indian, while continuing to strive for an ‘Aatmanirbhar Bharat’. According to the IMF, the size of the Indian economy is expected to grow to $4.7 trillion in 2024. That was the year Prime Minister Modi had marked for India to achieve a $5 trillion economy. Evidently, India is fast reaching the finish line of one of its most important goals in recent history. By 2026, meanwhile, the size of the Indian economy is expected to go up to $5.1 trillion.
There is a marked and a rather remarkable difference between what the West is going through, and what India is experiencing. Economies around the world are contracting. The names are big – USA, European Union and maybe even China. India, on the other hand, is steadily moving towards its goal of a $5 trillion economy. On one hand is a gloomy story of downfall and doom, and on the other, of hope, optimism and endless possibilities. The West now represents degradation – moral, political, social and most importantly, economic. India represents freshness, strength and moral uprightness all brought together to deliver positive economic results.
The balance of power is shifting. The world is changing. A new order is coming about, and the West is hardly going to be in a position of strength on the other side of it all.