Macroeconomic Impact of Eurozone Debt Crisis on India: Sensitivity Analysis Using Measures of Dependency

Vighneswara Swamy

Published: June 2020

The eurozone represents a significant market for emerging markets like India; hence, any stagnation or a downturn in the eurozone leaves a dent in their export growth. Sensitivity analysis using measures of direct and indirect export dependency through international production networks and other economies suggests that the eurozone crisis impacted through the trade channel. As the impact of the eurozone debt crisis was significantly negative, the levels of dependence on the USA and China continued to be stable without experiencing any sharp deviations. It is desirable for India to diversify its export markets and to further strengthen domestic institutions and policies to reduce the impact of such crises and shocks.