21 January 2008

Will there be a recession ?

How the future could possibly be ?

wrt US , INDIA , CHINA ...

There are talks of recession going around... there is speculation of what wonders will India and china achieve … the American universities are sending their groups to conduct studies on India… the British prime is visiting India to improve ties with it, the Chinese premier breaks protocol to display warmth to Dr.Manmohan Singh during his china visit…. The rising rupee is hurting the IT firms and the small exporters alike…the stock market is volatile and people are wary about putting their life’s earnings into it…

Among all this hoopla.. I think there will be a drastic changes in the world economies in the coming few years :

The recession and the sub-prime crisis will hit the American badly and the dollar will freewheel downwards leading to the countries pulling out their dollar reserves to buy other stable currencies like the euro… which will further wreck havoc with dollar’s exchange rate. The Americans will take huge debts from china and Japan to plug their deficits in the budget. Still The US will remain one of he strongest economies and few correct policies by the federal bank and the new president in office might stop the free fall.. as a strong dollar benefits not only the US but also the world on the whole.

The Chinese will continue to grow at the present amazing pace.. so will India for the present at least.. the world will see the rise of euro as the stable currency ..

How will this affect the Indian economy … to take a bird’s eye view … the IT companies which have their business modeled on the cost cutting and off shoring will take a major hit …due to the rising rupee and the falling dollar. But still it would be cheaper to get stuff done in India… so the overall worth might decrease.. Yet India will still get business till South America and china come up as competition.

On the other front the world will see the rise and consolidation of the Indian companies on the international arena . after Corus and Novelis and a spate of other acquisitions by Indian companies .., the Jaguar and land rover are being eyed by the Tata's themselves..the international competition will force the Indian industries to become better and enhance their quality.The Indian pharma and automobile companies will get stronger both in India and also abroad.

Even other areas like the exporters will take a hit in their business due to the changed scenario…the falling dollar will hurt the economy for few years till the situation is stabilized again … it will not be entirely fun to watch it happening but the end result might be !

The writing is on the wall: Indian companies will have to become better to face the competition, India has to move up on the value chain rather than jt providing the most cost effective solutions like in IT and BPO’s and other arena’s….we have to make a few sacrifices and build up the infrastructure else it will be difficult to sustain the rate of current growth.

___________________ INDIA and the development indices ____________________

India will still feature at the bottom of the most of the human development indices : the reason being the denominator is still HUGE .. i.e our population … how much ever we might increase our GDP and net output … the per capita will still languish … we must come up with a parameter which will be a better indicator of the scenario.. like we could build an index which shows our current situation as compared to 20 year back or 40 years back .. whether we have made progress on few fronts or have we stayed put.

Another index might be based on the rate of ‘rate of growth ‘ .. that is are we growing at same pace or faster or have we any hurdles…and one other parameter could be exploitation of potential… are we utilizing our resources well.. or is there any scope of improvement further … or that how scenario will change if we have better infrastructure compared to the one we have now …

we need able administrators.. we need infrastructure..we need better education for the young .. we need reforms ...we need SEZ's ... we need to ease the setting of business and we need a stronger foreign policy.. we need to shed the fear of international competition.. and ...we need to just keep the faith .. and keep running !

We sure do have a long way to go before we accomplish the dream of APJ !

1 comment:

Aks said...

That was a nice post, dude. Just read it.