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Print articleIndia, a Silver Lining Amidst Global Crisis
January, 2009 -
Today when financial experts are busy in measuring the depth of present financial turmoil, layman is cursing Governments and experts are blaming sub-prime mortgage payment defaulters but no-body in the economic fraternity could appreciate that it was a policy failure. Moreover, no one in the financial world could imagine the enormous size of the trouble that lending on sub-prime would bring the world’s biggest financial catastrophe of the century. The estimated loss of trillions of dollars in United States has shaken the world economy from its roots. The present credit crisis has been upsetting for the hedge fund industry. Heavy redemption's have worsened the havoc on the hedge fund industry. It is to be believed that the situation could get even worse with every passing day if no solution is sought quickly in the near future. Speculations are on that the Governments would tide over this uncertainty in the coming weeks / months with bail out packages. But reality is very harsh and we must accept that, recession is on. The pinch of the crisis would be felt by even your next door vegetable vendor. Symptomatic study reveals that despite giving billion-dollar bailouts, industry is reeling under sluggishness and cash strapped markets are looking marooned. At present, it is important for every economy to come out of the present liquidity crisis which is affecting the confidence of investors and because of this almost all developed and developing economies have been forced to bring in some economic measures to tackle this trouble.
All the banks in the world are watchful with respect to lending, even to a suitable client. This caution has brought the cash flow to near standstill and the same may lead to negative growth of the world economy. Moreover, very soon banking system would see much needed refinement since it is the need of the hour but despite refinement, it would be the question of trust, which banks would have to win from the investors. IPO’s would be delayed, looking into the market sentiment of uncertainty and lack of liquidity. Since necessity holds the fore front, all new infrastructure projects would be put on hold for some time. Takeovers and mergers would enter into a sew era because frustrate selling would be norm of the day. Payment disputes would also rise due to defaults in payments and may bring in some extra work for lawyers.
Telecom sector is bound to grow but at a negative rate and due to negative growth telecom companies would be compelled to wage their war with new technology i.e. 3G spectrum etc. In the present scenario, technology would steer the industry into a new era and many new innovations would surface in the days to come. So, it can not be denied that the major breakthrough in the technology segment is due now. Moreover, the present crisis is being calculated on every second basis because of technology and solution would also come with the help of technology only. Exporter of goods and services would see a windfall, due to rising dollar, provided they carry the same volume, what they were carrying so far. On the other front, importer would face a double whammy. On one hand import cost would go high and on the other hand local competitor would be in a position to produce the goods and services at even more cheaper price since industrial raw material and metal prices would rationalize to some extent and would help the product prices to correct further at another level. Power consumption would go down and petroleum prices would also see another low in the days to come. It is obvious that on the onset of recession, auto sales, especially mid-segment would see slide in sales. Media would play a major and important role to bridge the gap of one bullish run to the next one. Media companies would be one-up, however, the worker in the media may not be as lucky, keeping the gloom in consideration all over. In the time of crisis, thinking pattern would change rapidly which in return would transform the taste of people across the globe. Such changes would force the fashion industry to take unexpected shift. Textile industry would be equally hit with this financial storm and it may take two to three year’s time to settle down. Airline and Tourism sector would be the worst hit sectors. Colleges with faculties for higher studies would see influx of lay off professionals as new enrollments. United Nations Labour Organization is estimating 20 million job cuts in the coming year. Quantum of production fall can be estimated with this figure only and ripple effect across the board on the subsidiary and allied services would be enormous. But, sheer speculation can not undermine the Indian scene, since it is very positive due to big and ever swelling domestic market. Today, Indian markets include good chunk of rural market size. In all, India would face a drop in foreign investment for a year or so and the same would again start pouring back since India would be the only lucrative option after China since assets and cash need safe parking in recession. At the same time, new tyro to the business has tremendous opportunity to gain from this
situation since at this moment their niche would pay them good rewards. Most organization cut their marketing force in the period of recession where as the need of the experienced marketer is more important in such times. Laying off marketing force in the time of recession is the most common mistake, which most of the companies do and suffer. Intelligent corporate expand at the time of recession and history endorse the same. Today, corporate sector needs to look for small towns and rural segment to get past this financial crisis. Rural markets can generate much needed cash flow, which is at present missing from the every nook and corner of the economy. Solution to the current crisis lies in the very basic principle of economics i.e rationalizing the supplies and generating demand, so all we need to do is to take those measures, which can pull the demand up. Since, macro economic measures have not yielded much desired results so far due to fear gripped markets, now time demands quick grass root changes.
For Corporate, serious budgeting, monthly plans and regular reviews are needed to stay in the race of business. At present, any silly mistake can throw anyone out of business since the scope to comeback is very bleak. So, complacency can be very dangerous.
Present situation demands that we should address the common man in much resonance about the stock markets and apprise them that the same are not the real indicator of the health of any economy. Today, at individual level, we need to cut profit margins and improve upon what ever we are doing and tax cuts at all the Government levels, tax-holidays and subsidies to the start-ups which are desperately needed.
It can well be appreciated by the policy makers that many economic decisions consume more money, just to get implemented after taking the nod of opposition parties and red tape. Whereas, today the same economic decisions can be taken in no time and put in place. Optimistically, if we see, opportunity has knocked our doors in the guise of recession, to make this world a true global village. Let us sever the artificial barriers and make this world a one financial podium whereby, such or similar troubles could be kept at abeyance for centuries to come. Believe it or not, long stable global economy is ahead. Moreover, wisdom calls for solutions, rather than blaming anyone.
