US recession may lower commodity prices for India

India is preparing for the possible effects of tariffs imposed by U.S. President Donald Trump, especially on oil imported from Venezuela. These tariffs may raise costs for Indian oil refiners. However, some experts believe that a recession in the U.S. could actually help India's economy by lowering commodity prices and reducing import costs. Despite the looming tariffs, India's economy remains strong. It is not heavily dependent on U.S. markets, which gives it some resilience. In 2024, India imported a significant amount of Venezuelan oil, but the U.S. tariffs could disrupt these imports and increase costs for Indian companies. The potential for a U.S. recession has been discussed as worries grow over Trump's trade policies. A recent survey indicates a 43% chance of a recession in the next year, fueled by low consumer confidence and rising uncertainty. Some experts suggest that if tariffs fully take effect, the risks of a recession in the U.S. could exceed 50%. Even so, analysts from brokerage firm Bernstein say that India may benefit from a U.S. economic downturn. They argue that historically, India's economic growth has not been closely tied to that of the U.S. In fact, India's GDP growth may rebound before the U.S. economy slows down even more. India’s economy has several strong sectors that are relatively protected from a U.S. recession. Industries like pharmaceuticals, IT services, jewelry, and petroleum products can continue to perform well, as they do not rely heavily on the U.S. discretionary market. Even though there has been a notable outflow of funds from Indian markets, the situation remains better than during past global crises. If the U.S. economy weakens, prices for essential commodities like oil and metals may drop, which could help India manage its import expenses and keep inflation low. This could also stabilize the Indian rupee and allow for potential interest rate cuts, helping the economy grow. While Trump’s tariffs present challenges for Indian exports, especially in certain sectors, there is an opportunity for India to enhance its domestic industries. The tariffs can motivate India to focus on self-sufficiency and strengthen local production efforts. As global markets react to trade uncertainties, India's approach could lead to beneficial reforms in its economic structure.