India’s labour intensive sectors could bear greater brunt of global deceleration in 2023. Global slowdown this year will be led by advanced economies, especially the US and the eurozone. Being two of India’s largest export destinations, a slowdown in their economies would imply lower demand for Indian exports. Sectors such as textiles, footwear, and leather depend significantly on these two regions, making them particularly vulnerable to a slowdown in these economies, according to an analysis by Crisil.

S&P Global, in its November 2022 outlook, predicted global growth to slow down to 2.2% this year from an estimate of 3.4% in 2022 with the US economy contracting 0.1% and Eurozone remaining flat in the base case, as the impact of continued monetary policy tightening across major economies manifests.
Raising interest rates typically cools demand in the economy but it also has the potential to trigger a slowdown in overall economic activities.

According to IMF’s January 2023 World Economic Outlook advanced economies are projected to slow down this year. The World Trade Organization (WTO) also projects the global trade to slow to 1% in 2023 from 3.5% last year. This spells bad news for India because its growth cycles have become highly synchronised with those of advanced economies over the years, noted the Crisil study.

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