India is likely to suffer significant slowdown in exports, higher interest rates, instability in financial markets, increased unemployment as well as lower growth should the US fall into recessionary conditions, according to the “D’conomics” report by Deloitte in India.

Along with global integration, dependence of the Indian economy on US has grown and is evident from the fact that the US has been the second favourite destination for exporters and the third largest source of FDI inflows in India, it noted.

“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.

With a high degree of global financial integration, any reduction in US balance of trade would have negative effects on many countries. A depreciated Dollar would diminish the value of reserves held by various countries including India.

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

“However, it is possible that the buoyancy in agricultural sector growth, major infrastructure investments, improvements in manufacturing sector yields and a robust service sector may help India weather the negative repercussions that may arise from the US”, the report said.

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