Indian Economy Shines While UK, Japan Battle Recession Amid Global Woes

The developed countries face serious threat of high inflation, slowing growth and rising unemployment which eventually could push these economies into a technical recession this year and while United Kingdom and Japan are already into one, India retains its position as the fastest growing nation in the world.

Japan has slipped to the world's fourth-largest economy, yielding its position to Germany. The shift is attributed to a significant fall in the value of the Yen, as revealed by official data released on Thursday.

Likewise, United Kingdom sank into recession in the end of 2023 driven by a spoke in consumer prices and a cost-of-living crisis, giving a blow to Prime Minister Rishi Sunak before the upcoming election.

A technical recession by definition is two consecutive quarters of negative growth.

While economically these countries are facing the heat, the central banks including the Bank of Japan who has kept interest rates at -0.10% - under its stimulus programme and the Bank of England who has kept rates steady at 5.25% will have to think of alternatives to help the economy.

"Weak GDP outcomes will complicate the BoJ's policy decision, especially while the JPY is hovering around the psychological 150 level," said Min Joo Kang, senior economist at ING.

"We anticipate that the market expectation for a March/April rate hike will die down. But if growth rebounds in the current quarter as we expect, then we believe that the BoJ will deliver its first rate hike in June, though the possibility of a rate hike and ending yield curve control later in Q324 is growing."

Britain has many concerns to deal with. Britain's economy has been stagnating for nearly two years. The Bank of England has said it expects it to pick up slightly in 2024. But Prime Minister Rishi Sunak had promised economic growth among other things in the UK so this must come as a big jolt to him just ahead of the general election.

"Overall, a weaker than anticipated growth report that also flags the impact of high interest rates on the construction sector. BoE Governor Bailey earlier in the week seemed to try and play down the importance of the report, but coming on the heel of the lower than anticipated inflation number yesterday, the data will add to bets that the BoE is on the way to rate cuts, and earlier than previously thought," Economists at Action Economics wrote in a research note.

"We continue to see rates on hold at the next meeting, but the chances that the BoE will move to an easing bias then are rising, unless confidence data bounce more than anticipated and suggest that companies have the room to pass on higher wage costs."

United States and China are also battling economic war and is expected to slow down in the current year.

India, in the meantime, is shining bright with over 7% growth expected. The fifth largest economy grew 7.6% in the July-September quarter, driven by government spending and manufacturing.

This is the year of many political developments including elections in several countries. It is yet to be seen if there will be economic implications due to the upcoming poll.