As Germany suffers recession, here’s how India will also be affected

Footwear, apparels, leather goods are some sectors which will have to bear the brunt of the recession

Germany is in the news for the recession it is suffering. As the country struggles to make ends meet, it will have an impact on the Indian economy as well.

Before getting into the nitty-gritty, let’s have a look at what India exports to Germany because it is this sector that will be hit the hardest.

As per a WION report, in 2022-23, Indian exports included machinery worth $1.5 billion (Rs 12,384 crore), electronics worth $1.2 billion (Rs 9,907 crore), footwear worth $332 million (Rs 2,741 crore), auto components worth $406 million (Rs 3,352 crore) among others.

Also Read: Germany in recession as inflation, higher interest bite

How Germany’s recession will have a say in Indian economy

India thrives on its exports to Germany. That being the case, it is the exports sector that will see a massive dent, thereby leading to a dip in earnings from exports to the European Union’s largest economy.

Footwear, apparels, and leather goods are some sectors which will have to bear the brunt of the recession.

Industrialists in these sectors are a worried lot as they anticipate heavy repercussions not only by the downturn in Germany but the spiralling effect it may have on other European countries.

“This is going to affect Indian exports not only to Germany but Europe as a whole since other countries are also already in recession,” Indian Express quoted Sharad Kumar Saraf, Mumbai-based exporter and Chairman of Technocraft Industries.

India’s exports to Germany in 2022-23 were worth $10.2 billion (Rs 84,216 crore). Now with the recession in Germany, India may see a dip in exports.

India now expects its order flows to be affected.

Also Read: IMF says UK no longer heading for a recession in 2023

“Business will be down by a minimum of 10 per cent. This slowdown will definitely impact the investment flow from Germany,” Indian Express further quoted Narendra Goenka, Apparel Export Promotion Council (AEPC) Chairman as saying.

As per Ajay Srivastava, the co-founder of the economic think-tank GTRI, India’s exports could face an adverse impact to the tune of $2 billion (Rs 16,512 crore) in the smartphones, apparel and other sectors.

Additionally, India may also face a financial burden as the carbon border tax to be imposed by Germany will have an impact on the export of iron and steel products.

Germany is suffering a recession as its Gross Domestic Product (GDP) fell 0.3 per cent in the first quarter of 2023. In the fourth quarter of 2022, it fell 0.5 per cent, thereby heaping financial misery on the country.