A recession refers to a significant and extended decrease in economic activity in a specific area. It is measured by a drop in GDP (Gross Domestic Product). While a recession can last several months, it may take years for the economy to bounce back.
As we look ahead to 2025, there is considerable economic uncertainty, and experts are warning of a potential global recession. This raises the question: “Which businesses will thrive during tough times, and which ones will struggle?“
In this blog, we will explore which industries and companies are likely to navigate the recession successfully and which ones should brace for its effects.
The cause of recession in India
A recession happens when there is a major drop in economic activity for a long time, usually at least two straight quarters of negative GDP. Here are some reasons why recessions occur:
- High Inflation: When prices for goods and services rise too quickly, people can’t afford them. This leads to lower demand, causing businesses to earn less and possibly lay off workers. An example is the stagflation crisis in the 1970s.
- Rising Interest Rates: To fight inflation, banks raise interest rates. Higher borrowing costs mean businesses invest less, which slows down the economy. An example is the recession in the early 1980s.
- Stock Market Crash: A sudden drop in stock prices can result in significant losses for investors. The Great Depression in 1929 is a notable example.
- Global Events: Unexpected global issues like wars, pandemics, or natural disasters can disrupt supply chains and trade, affecting economic stability. This can lead to shortages of goods and reduced business activity. An example is the oil crisis in 1973.
- Government actions: Bad economic decisions, high national debt, or weak financial rules can lead to instability. For instance, the Argentine economic crisis in 2001.
- Conflicts and wars: Disputes between countries can interrupt global trade and raise oil prices, causing resource shortages and lower economic confidence. A notable example is the Ukraine-Russia war.
Effects on the Indian market:
- Financial Services: In 2025, around $9 billion in foreign capital is expected to leave, affecting banking and financial stocks.
- IT Services: A global recession might decrease the need for IT outsourcing, causing project delays and higher prices. Companies could see fewer international clients, leading to lower revenues.
- Manufacturing and Export: A recession may lower global demand for Indian exports such as textiles, automotive, and electronics. Manufacturers could face order cancellations and pricing challenges.
- Real Estate: Economic uncertainty might result in decreased investments in real estate. Construction companies may encounter project delays or cancellations due to less funding and rising material costs.
- Agriculture: This sector may be less impacted by the recession because of steady domestic demand. However, lower exports could affect farmers’ earnings.
Despite the challenges, there are some sectors which may benefit from the recession:
- Healthcare and pharmaceuticals: Healthcare is a necessity, so no matter what people continue to spend on medicines and treatments. Consumers may want to buy affordable generic drugs which will benefit the pharmaceutical manufacturers.
- Fast-moving Consumer goods(FMCG): Food, beverages, household items will continue to sell despite economic decline. Consumers will shift towards affordable brands. Online grocery delivery may see a rising demand.
- E-commerce: People might shop online more to cut down the cost and growth of second-hand products can be expected. Consumers will cut down on dining out and movies and instead they will go for subscription-based services.
- EdTech: People will opt for online courses to increase their skills. Students and parents will look for budget friendly alternatives for the traditional education system.
- Renewable energy infrastructure: Companies might invest in renewable energy projects (such as wind and solar) due to lack of resources or increased costs.
Impact on Employment & Jobs:
A recession clearly affects the job market, causing layoffs, pay reductions, and changes in work habits. IT companies might reduce their workforce, cut expenses, or hire less due to lower demand for outsourcing. Banks could raise interest rates, and a drop in credit demand might result in job losses in investment banking and lending sectors.
The Gig economy, freelancing, and contract jobs are likely to grow significantly. High-paying private sector jobs may decline as the luxury market contracts due to reduced incomes. More people will seek government jobs for stability rather than high salaries. However, roles in cybersecurity, data analytics, and AI may still offer good pay as companies focus on digital transformation.
A recession creates economic uncertainty that affects businesses, industries, and jobs. While some sectors may face difficulties, others may find growth opportunities. Job losses and pay cuts are expected, but freelancing, digital roles, and government jobs can offer stability. Those who plan carefully, improve their skills, and adapt to changes will overcome challenges and come out stronger.