“Global Economic Recession & It’s Impact On Indian Economy”

A Two Day National Level Conference on

“Global Economic Recession An Opportunity To India”

16th & 17th December, 2009

Topic :

Global Economic Recession & It’s Impact On

Indian Economy

Dr. Mahesh C. Dabre,

Smt. L. R. T. College of Commerce, Akola.

Dr. S. N. Raut,

Shri Shivaji Arts, Comm. & Science College, Akola.

Weakening of the American economy is bad news, not just for India, but for the rest of world too. Indian Companies have major outsourcing deals from the US. India’s exports to the US have also grown substantially over the years. The writer taken interview of 60 persons from different fields i.e. engineers, traders, industrialists, experts of share market, subject experts etc. 73.33% respondent responded that, India’s export increased over the years. The Indian Economy is likely to lose between its 1% to 2% points in GDP growth in the next fiscal year.

The economy and the stock market are closey related. The stock markets reflect the buoyancy of the economy. The Indian stock markets also crashed due to a slowdown. However, stock prices are now at a low ebb in India with little cheer coming to investors. 100% respondents agreed with the conditions of stock market. Sudip Bandyopadhyay, director and CEO, Reliance Money focused that, “In the globalised world, complete decoupling is impossible. But India may remain relatively less affected by adverse global events”. In fact, many small and medium companies have already started developing trade ties with China and European countries to ward off big losses. 85% respondents responded that, now a days major part of export carried by small and medium companies.

IT and IT enabled services, textiles, jewellery, handicrafts and leather segments will suffer losses because of their trade link. Certain sections of commodities could face sharp impact due to the volatile nature of these sectors. The IT sector will be the worst hit as 75% of its revenues come from the US. 100% respondents responded that, IT sector badly affected due to recession. Whole the world observed its bad impact. According to Dharmakirti Joshi, director and principal economist of CRISIL, along and severe recession will seriously affect the portfolio and fixed investment flows. Corporates will also suffer from volatility in foreign exchange rates. The export sector will have to devise new strategies to enhance productivity.

Can India be a market option? Zinnov says IT firms can definitely find a market in India, but the deal sizes are likely to be small. India has a huge, small and medium enterprise base and it is the right time to tap this segment. As for automotive components, consumer electronics and mobile devices, they have already found a market in India and have also started looking at tie-ups in China and other BRIC countries.

According to 95% of respondents this recession gives us opportunity to be innovative and to think out of box so that the US directly don’t affect our robust growth. Due to increasing rupee exporters are having a hard time but it has been noted that our exporters are not that efficient and in past they got the benefit of depreciating rupee. So how its time to be innovative and more effective and increase the overall efficiency and go for systematic cost cutting to balance the rupee effect. Infacts there are lots of scope for improvement. Unlike the rest of Asia, India is strong domestic demand story, so any slowing in the world is likely to have a more muted impact on India. Strong growth in domestic consumption and significant spending on infrastructure are the two pillars of Indias growth story. No sector has a dominant influence on earnings growth and risks to our estimate are limited. Corporate India is also learning to master the art of different capital management, reduction in costs and delivery of value – added services to sustain profit margins. Further interest rates are expected to be stable primarily due to control over inflation and proactive measures undertaken by the RBI.

References :

(i) Mishra and Puri, Indian Economics, Himalaya Publication, Mumbai, 2007.

(ii) Loksatta dated 22nd July, 2009

(iii) The Economic Times, 16th September, 2009

(iv) The Hitavada dated 04th October, 2009.

(v) www.weekipedia.com

(vi) www.google.com