These are disheartening times. The whole world is shocked with Lehmann Brothers and Merill Lynch’s downfall. US had an aggressive economy and to see their banks crumble like a pack of cards was dismaying. Something went drastically wrong somewhere, and it had its repercussions on Indian economy as well. I wanted to express my apprehensions about it but thought Sachin would offer better insights. Thanks to him for taking time out for my humble blog 🙂
Here it goes…
With global meltdown continuing to stretch its arms all over the world, we Indians are still saying “India is least impacted”. Should it be called optimism or sheer escapism? Let’s take a closer look at the situation facing us: Inflation is still above 11%, Rupees is around 48.50 / dollar, IIP growth stands at 1.3% and Sensex has closed at 10269 points. Are we waiting for a harder impact? Sure there is more to come.
Banking industry is the worst hit. It is reeling under liquidity crunch with home loan market slowing down, retail loan sector not performing well and borrowers running away from banks. Surprisingly, Mr.KV Kamath of ICICI Bank announced that it will take legal action against those spreading rumors against them but remained mum over the steep fall in its share prices. HDFC too has burnt its fingers in the home loan segment.
The aviation industry is crying with Indian Airlines announcing that its 15000 employees will go on leave without pay for 3 years. How does one call this a leave? It’s only when their boards of directors are assured that their employees can stay without food for 3 years. Jet Airways too sacked its 1600 employees only to take them back in a dramatic manner. Naresh Goel, the MD was brought under tremendous political pressure but validated his decision to the tears he saw in the eyes of his employees. I believe he couldn’t afford a kick in his ass by the Prime Minister. Kingfisher can’t stay far behind in any race, and immediately announced salary cut for its trainee pilots and further froze in pilot recruitment. But does it stop Mr Mallaya from spending more on his wines and babes than his employees’ salary.
The automobile industry is also under tremendous pressure with sales falling sharply as compared to previous Diwali. TATA pulled out from Singur under “ M” influence and Mamta Di is claiming the biggest political victory for Trinamul. She needs to go to an economics school to understand the magnitude of her “victory”. She would turn India into Afghanistan if allowed to claim such victories on national level!
IT Sector is worried over the scrapped projects of US and Europe, cutting down of the onsite jobs and throwing of the employees on bench. Though dollar appreciation has given them some relief but with new business not coming and pipeline projects being scrapped there seems to be no end to their misery. NRI’s too are feeling the pinch and as a result the foreign funding has taken a backseat. Real estate and stock market which rode heavily on these foreign investments and had its prices skyrocketing in the past few years are now running for cover.
How to forget our Big brother in this situation? Unfettered capitalism which made USA scale the heights of successes …is now making them bleed. USA believed that free flow of capital coupled with minimum regulations would lead to rapid growth have now learnt a lesson the hard way and hopefully realized that regulations are necessary to keep the economy in control. Americans are known to spend more than they earn all thanks to the credit card and their banks are known for funding without taking adequate mortgages and credibility check of borrowers. The worst affected in the US economy is the home loan segment due to sub prime crisis , the borrowers defaulted in the EMI payments and banks having no proper mortgages, got the whole system crumbling. Bail out measures offered by the government may improve short term liquidity but it cannot plug the loop holes in the system.
Now their only hope appears to be Obama because McCain is expected to follow the same Republican policies of Bush may be with little changes here and there.
Bush babu has vested interest in the oil business …both father and son waged wars in the Middle East for oil and never for their country. Bush the junior made sure that a major chunk of US national budget was apportioned towards capturing Saddam and Osama.
Barrack Obama is promising end to wars. May be then the US budgets would channelise themselves for productive purposes.
I would agree with Amartya Sen’s statement that if USA does not recover in short term it may lead to a major economic breakdown in India.
But friends, when the whole world is crying our neighbor Pakistan is doing something out of the box. They are trying to make two nuclear reactors with China’s help. When the whole world is bleeding isn’t it the right moment to make bombs?