Tuesday, December 23, 2008

Capitalism Paralyzed: Will India Remain Immune??

“Capitalism is the astounding belief that the wickedest of men will do the most wickedest of things for the greatest good of everyone.” – John Maynard Keynes, Economist and founding father of IMF and World Bank.

 

The Texan cowboy George Bush, who I bet cant score any better than an F in “Financial Management” rightly said, “Wall Street got drunk”. But the million dollar question is how big the hangover is & how long does this hangover going to last. Nowadays when you open a newspaper or a magazine, u read about bankruptcies, scams, scandals, meltdowns, bailouts. And this is not limited only to the land of the “Greenback”; it has affected the whole world including the prosperous EU, Japan & the new kid in block “Asia”. The recent poster boy of world economy “Chindia” is showing signs of cracks after performing consistently for the past few years. Until quite recently, the world’s fastest-growing big economies both felt themselves largely immune from the contagion afflicting the rich world. Optimists even hoped that these huge emerging markets might provide the engines that could pull the world out of recession. Now some fear the reverse: that the global downturn is going to drag China and India down with it, bringing massive unemployment to two countries that are, for all their success, still poor.65% of the Indian population still depend on Agriculture which accounts for a measly 18% of the GDP and is growing only at 2%.India which has been consistently growing at 6-8 percent over the last 5 years, the stock markets got inflated like hell due to the inflow of FDI money. Now as the money is retreating & the global credit market drying up, the markets shrunk back to 7k level, one third of what it was at the pick. No doubt the per capita income has increased in the past 5 years & the Indian middle class has become a global force to reckon with, but India is still home to some two-fifths of the world’s malnourished children. The GDP growth which was basically propelled by the services sector is badly hit because it was coupled with the global markets. the government is unable to come out with a bigger stimulus because of the deficit it already has (around 8% of the GDP) To make thing worse, there are terrorist attacks which may bring political instability & there is a huge chance that the Three Musketeers of Indian Finance i.e. Manmohan Singh, Ahluwalia & Chidambaram would not be there any more to control the stakes of the country.

 

Well, the pessimism may be overdone. China, with an economy of 4 trillion $ & huge cash reserves, obviously wears a huge pair of trousers with deeper pockets, but India’s export dependence in only 21% as compared to 37% than that of China. India’s job creation has doubled in last 5 years & will hopefully continue with the same speed. The Indian stock markets have started to show resilience & have bounced back to 10k levels with the help of Desi players like cash rich LIC etc. With a more capable leader like Barack Obama leading the State of Liberty now & the new stimulus of 850 billion $ which targets all the fundamental aspects like building schools & other infrastructure, is also a good news for the IT & ITES industry. I hope the next stimulus by the government would be in the similar lines, targeting the more fundamental aspects of improving the rotten state of infrastructure rather than giving mere tax rebates.

4 comments:

Sania said...

Hey... good work!
Nice data collection!!
I just hope India comes out of the recession soon and increases its immunity with time!

Jayendra Katti said...

nice work panda.....good to see u comin up with such resourceful thoughts...its always nice to see some serious stuff on blog!!

India's dependence on exports which is merely 21% as you rightly highlighted is the reason behind the not so high exposure to OECD countries forming majority of the exports, thereby saving us from the otherwise huge losses arising out of lost sales and default payments....also recession is a part of an economic cycle, which takes it toll badly on huge consuming economies like the US and Europe, but nevertheless it should be our resolve to make our economy as self-sustaining as possible, assuring atleast partial insulation from global financial shock-waves....this can be rightly done by government spending and more importantly government-instigated private spending boost!!

Sankhara Buddha said...

Abhijit!!!!

First Really the praise. Great Stuff!! Full Kudos. If I believe all the data is correct then its good...Well some them one can easily co-relate to be correct even by reading. Now the next part if You have committed all these data stuff in your Head then Man .... You truly have become something to be awed.

Now a Questiion from my Side. However, I am no more into these stuff I hardly get to read so much on these affairs. But I would Like you to comment. Despite all the pessimistic figures and despite all the odds about (I dont Know about other Nations of ASIA), one figure surely holds a prominent place and that is the Rising Middle Class. This section is actually driving India. How ? The Reason is morally, intellectually and intuitively this section is inclined to SAVING and doing MORE SAVINGS. This increased savings is actually keeping the Indian Banks and the Economy to a great extent afloat. My rough Figure about the increased savings in India has increased by as high as 37% over the last financial year.

So Do You think that is a compelling reason for everyone to cheer and this also will be the reason for India's Survival in these Recessionary times and also to evolve as a major player in the World Economics.

Do Comment.

Loved Your Post. Keep writing more of these Stuffs.

Thanks
Indraneel.

craziness gingered.. said...

Great stuff Pandesh..

We are strong because still our domestic market is strong and our banks are not that bad fundamentally.. Well I am not much into this..

I must say, I am optimistic and so are you for sure..What's wrong in changing this name harvestor_of_sorrow..