It is said that current situations has made an economic slowdown inevitable. Examine how the US ha been at the centre of these factors resulting in slowdown

Different factors have been at play which is resulting in slow growth in each of these big economies. Factors such as the global slump in the manufacturing sector, weak global sales in automobiles and electronics, and a drop in business confidence owing to uncertainty in trade and investment are facilitating the continuous slide.

US-China tariff war

As a tit for tat measure both the US and China are indulging in tariff play and are resuming and dropping the bilateral trade talks intermittently resulting in immense uncertainties. As Bloomberg reports, this uncertainty could lower world GDP by 0.6 per cent by 2021. A quick solution to the tariff war looks like a bleak possibility.

Investor Confidence

As the US puts conditions on China, such as resolving the mass protests in Hong Kong for resuming the talks, the uncertainty is looming large. The protests which are on since June 2019 in Hong Kong, Asia’s financial hub are denting the confidence of investors and businessmen.

Due to protests Hong Kong’s GDP and exports have been worst affected in FY 2019 owing to setbacks in Asian manufacturing, trading and investment.

US sanctions on Iran

The re-imposition of US sanctions on Iranian oil has not only affected Iran’s economy and price levels, leading to a weak currency, but it has also resulted in disruptions in the supplies of oil and oil price volatility.

Both India and China which are the two largest energy-consuming countries in the world are badly affected, as both countries are among the largest importers of Iranian crude on favourable terms.

Where does India stand?

All these uncertainties are supplementing the already existing difficult situation in the Indian economy, that is, lack of aggregate demand. Though the US-China tariff war gives an opportunity for Indian exports to export more to both countries, we have failed to capitalise so far.

Topics: GS-III: Economic Growth Development