Monday, February 23, 2009

Recession - Get rid of it from your mind

The times we live in are more challenging for the simple reason, globalisation has set its roots firmly in India and its effects are clearly felt. Last year, around this time, we were ebullient with the economy predicted to touch 9% growth for the second consecutive year. It however fell short of that mark, but pessimism was not in the air. People were still talking about expansions and capital investments. In plain words demand was not expected to recede. But today recession is the word that tops the list of words we Indians utter. Be it for lack of business or for joblessness, "it's recession, you know".

Surely India is hit by the recession in US, UK and the lot. Our exports are nearly 25% of our GDP and the sector employ(ed) nearly 150 million people. Only agriculture employs more people than export sector. Foreign Investments, both the hot (FII) and hard (FDI) varieties, are not forthcoming and external borrowings have become costlier. Despite all these we still are growing and expected to grow at 5 to 7% for the current fiscal. There is no negative growth, not even for a quarter, to justify claims of recession in Indian economy. It has definitely slowed down compared to 9% growth we achieved for fiscal 2006-07 but nowhere near negative growth.

I came across Nobel Laureate Amartya Sen's comments on recession in yesterday's edition of The Hindu. He is on the dot when he said,

"No amount of financial stimulus into the global economy is going to rid the world of recession. We have to get rid of this mindset...the mindset of recession. It's a matter of psychology than economics."

In India we haven't yet felt the real effects of a recession but already think we are in one. It may be true of export sector but then if that sentiment is allowed to be carried over to the rest of the economy then we would surely experience recession.

Indian banking system is awash with money as very little of it moved out as loans and advances during the last few quarters. All the money released by monetary interventions by RBI are lying with RBI itself in various forms. The 'Recession' disease killed the risk appetite of our bankers. As one bank manager put it, even new proposals have trickled down. Whom to blame? The banks? The Government? or The businessmen? Surely the hit to the export sector will have its effect on ancillary units that depend on them and those failures would rankle the bankers and the businessmen. But then there is still room to move around, not that one is trapped in a 2x2 warp.

Businesses may have made the mistake of reckless investments when the picture was rosy. Businesses would be wrong to avoid prudent investments when the picture is not rosy. Every time presents an opportunity. Never is the time apt to innovate and improve than these tough times. The slowdown will not last if we keep the word 'recession' away from our minds and make business decisions based purely on the merits of each case.


Breeze said...

It looks great!!!!! Thanks heaps

N.Balajhi said...

welcome and thank you breeze for your complement.

Siva said...

Balaji, congrats on the new blog. You have started excellently and timely with a very positive note, with a great looking layout and theme. The background color, fonts and the picture at the top, all has a professional touch.

I expect you to make lots of posts and share your knowledge and views with us. Many thanks.

N.Balajhi said...

Thanks Siva. Hoping to make regular posts. I find it helping really. Now I constantly think about new topics and what to post. It feels good to think this way.

Prabakaran said...

Balaji, Very good initiative. I will definitely keep watching for new topics and discussions.

N.Balajhi said...

Thanks Prabakar. Looking forward to your views and comments.

Steve Berke said...

I enjoyed reading your article :) PLease continue publishing helpful topics like this. Regards, from

I think this article will fully complement your article.


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