I wanted to write on recession for long but also waiting to arm myself with some more information before actually going ahead to commit this act. The heading is from what I did hear this morning in the gym over a FM station they were playing in the club house. I thought to take this as a title for this blog.
As for others it really has stuck me out of the blue too. First I was gasping so as what went wrong in such a short time. The other day I thought to interview my CFO friend while we did a car pool to the office neither to beat recession nor to save fuel not even the green concept was there remotely in the mind. We do this sometime just to share information amongst our self; honestly I am no match in providing information but surely a beneficiary in getting a lot. Once we got settled I started with my questions. I probed “Have we reached the bottom? The economists say that we are yet to reach it and the bottom might be deeper. We are yet to see the worst and even if we have to take it with a pinch of salt we are sure to be in more trouble”. His reply was almost spontaneous “Everything was wiped off hence already reached the bottom, what economist are essentially telling is that we will be realising this fact slowly, we were sitting on a bubble and the bubble did what it is supposed to do”. It surely did leave me wanting for more “Do you mean to say that the bubble was many times larger than the base? If it was why people couldn’t recognise it early”. He replied “Yes it was many a time one could have imagined, it was looking so beautiful from the hilltop nobody wanted to believe that it was all a mirage. What can you expect from people who actually created it?”
Even now I am struggling with that question but some thought are getting crystallised and hence putting them down. We had seen the fall of extreme socialistic economy quite earlier in the decade. Probably we thought that capitalistic economy is the best and just relentlessly followed it to the other extreme. USA being the Mecca of capitalistic economy took this form of economy to the top most level. We just created the bubble and as my friend said that the bubble did meet its ultimate fate. See the irony we again trust those very high priests of capitalism the so called economist to bring us out of the mess created by them. I am convinced that neither Left nor Right but it is the centre form of thought is required, I am sure as leftist and rightist there must be centrist word too, which would have been coined by now somewhere as a solution to go forward.
Coming to India, we see news mentioning that we will continue to have GDP growth of 7% as opposed to 9% predicted earlier. We as Indians take a lot of pride, satisfaction and relief that probably we are not that worst hit. Somehow I am too uncomfortable with this GDP figures. I would like to go little deep inside it to know what are the major components of this GDP figures. I did read an analyst saying “Not every bit of GDP is necessarily ‘good’ GDP. Take the case of gambling. It is an industry and is counted in GDP. Someone needs to build the casinos, manufacture the cards, manufacture the tokens, manufacture the liquor that is consumed (another not so ‘good’ GDP), manufacture the cigarettes (yet another not so ‘good’ GDP), and then all the linkages that come from there - the cement to build everything and the trucks to transport everything. So a country that builds many casinos may be adding to GDP but, chances are, its society will not be that ‘happy’. If parents are busy gambling all day long, then who is with their children? Or if people smoke and drink a lot (which could happen in a casino environment) what happens to the health of the ‘healthy’ people and the cost inflicted to society over time? Looking after sick people in hospitals is not ‘good’ GDP - there is an economic activity that adds up to GDP but no one is really ‘happy’.” He adds “’useless’ GDP comes from the statistics of foreign buying in India. Over Rs 4,000 crores of buying and selling by foreign ‘investors’ occurs every day in the Indian stock markets. At the end of the day, they have actually bought or sold only Rs 150 crores of stocks “.So we this might be our own bubble. RBI has for sure deflated the bubble a bit so as to set some realistic expectations. I have no other way but to rely on them and pray that they are correct. If I see as a lay person, I am able to see it traces of recession everywhere in our economy.
From the day Goldman Sachs coined the word “BRIC” it has been chasing me everywhere. Whenever I meet a foreign company for selling their products in India, once they start with the word “BRIC” I know that I will have a tough time. I have not read the “BRIC” report but what they have done by including the letter “I” and country “India” is they have set the high expectations and also paired it with the other three. I sincerely feel that this misconception should have been cleared from peoples mind. I do agree that the great India story is there in terms of exception but I have serious objection to the pairing part. India could not be compared to China, Russia or Brazil for that matter. All these economies are having different characteristic. Indian story is just like “making an elephant dance”, it’s difficult to do so, and it is slow but once it dances there is going to be a great momentum. All this is quite reverse to the fastest developing economy in “BRIC” that is China. Worst to come is when they do paring they tend to compare with the best only. In China development means that the infrastructure will come first, the roads, airports etc will all come first and then people will move in followed by businesses. In India all the Industries will come in, people will move in and then they will start thinking about the requirement for the road to connect the place. I am actually OK with the Indian model, this actually means that we are utilising our resources quite efficiently but it is just opposite to what they do in China. Our Government does not do this as a strategy but this is how it only works here. Probably this is the way we Indians think. Hence reaching the expectations will take time but it will surely meet the expectations, more robustly then what could happen in China.
Inflation might be coming under control, today as soon as I came back from the GYM my mother announced me that there is drop in fuel prices again, twice in recent times. Probably we will be ok with the Inflation thing. Recession is surely catching up with us now and it can bring in the must unwanted depression. Being in IT field I just started to wonder what it has in store for us.
I think that we have to look in two ways one is short term and the other being a long term. For sure the short term is gloomy as most of the companies and people are still accessing the impact on their businesses, hence they have decided to cut their costs and remain passive for some time. Some of them are moving in for more harsh measures and some moderately, others are slow. So short term we need to just survive and prepare our self for the long haul. I am quite optimistic about the long term prospects provided we are ready to cash that opportunity. Once the dust get settled most of the people will find out that it is much more cheaper to get the goods and services from countries like India, but here we might need to prove them that we are ready to take that extra responsibility, we have to show our skills to take that work, once we are able to do so probably this could be a new IT wave which will sweep India. There is silver lining in even the darkest of cloud; probably this is our silver lining. My CFO friend had his own silver lining he said “CFO’s will be in great demand”, I quietly said “Amen”.
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