I am sharing some thoughts on various topics, which have been drawing my attention, in recent times. Please feel free to share your comments.
One of the topics that find a mention in every communication media and informal chats everywhere is the recession in the global economy and its impacts in India. Though I am neither a Paul Krugman nor an Amartya Sen to comment on this topic, the very talk of recession being applied in the Indian context, when in fact the economy is growing at a healthy rate of 7-8%, is indeed a pessimistic view. Let us reserve the discussion about whether the numbers captured are accurate to a later post. Though the percentage growth in net profits has fallen, the growth by value of India Inc is higher over the previous year.
There is no doubt that the Indian economy is closely coupled to the events happening across the globe (mainly the US) and the repercussions in India are already seen in the decreased industrial productivity numbers and the decline in net profit growth rate over the previous year. But, the fact that the Indian banks are relatively free of risk based assets, compared to their global peers, is indeed heartening. Also, the RBI has been taking measures to increase the liquidity of banks and hence the loans given to industry. These steps could drive the interest rates lower, spur companies to invest for expansion in order to meet anticipated increased demand. But, the real dampener is that it takes time for the interest rate cuts to be reflected in the loans that Corporate take. So, many Corporate already facing a liquidity crunch could resort to job cuts and increase short term profits. This move could be counter productive and result in slackened demand, which could amplify the slowdown in growth. So, the Indian Corporate should look at various options to stimulate growth rather than taking the easier route of job cuts as a first measure.
