Tuesday, October 28, 2008

Sensex -Senses?

It is Diwali today!! Amidst all the gloom and doom predicted all around..am I glad to notice two pieces-that really need us to stop and think..how we in India-are different!!

Rama Bijapurkar's prognosis on consumer spending is a revelation!! Her take: Consumer India is a hydra -headed monster-and consists many demand segments or "mini Indias"and each of them is not as badly hit by the US recession!! The news on the overall consumer demand is better than we think it is!

-there are some 85 million farmers and their families -who have had a good monsoon and crop and recent loan write-offs.
-there are 5-7 million government -and quasi government employee families who are laughing all the way to the bank!
( Both these segments by far out number the 20 million affected by stock market or the 2 million in IT/ITES sectors with shaky jobs and low confidence!!)
-This is probably the first time that the rich are getting hurt more than the poor-but they have the resilience to ride through-especially since most of them are hurting on account of being the most over leveraged!
-And finally- as the top 20% of India accounts for about 43% of consumer spending-the bottom 60% for about 36% -the mass may be safer than the class.

Aren't there opportunities to shore up market share or customer loyalty??
And hey, juxtapose it with the article The fright and the wrong by Shekhar Gupta of Indian Express -we are reminded that
"While Singapore and the UK have reported a small contraction and the US is headed that way, the most, most pessimistic prediction on this year’s growth in India is 6.5 per cent, only the second behind China, although a very conservative RBI still says 7.7. You call that recession? Normally, it would be a boom year. But we are so spoilt by four years of 9 per cent and so terrified looking at the slide in Western economies that we have misread a slowdown for recession.
And we are not a small economy. Exports are only 13 per cent of our GDP and while some will suffer due to a global recession, some sectors will benefit hugely from a weaker rupee. There is an enormous domestic demand for goods and services and hundreds of billions worth of infrastructure to build. Yes, capital will be scarce, but why don’t we also factor in the cost reduction because of crashing commodity prices? Because of falling crude prices, the Government could save Rs 100,000 crore this year alone on fuel and fertiliser subsidies; going ahead it could be two and a half times as much. Over the next few weeks, we see Inflation falling drastically, a cut in fuel prices, a drop in interest rates and the release of Pay Commission arrears. Households in India are heading for a much better year compared to the last couple, though of course those invested in stocks would rue the loss of their net worth.

I would suggest each one of us to read the article- especially the section where he quotes General Sundarji about a real life army incident. " Fear and courage, are the most infectious of all viruses. In times of great stress or anxiety, or under threat, human beings look at the next guy and make up their minds entirely on the basis of what they read on his face."

"We are still looking at an economy on the up, and one that is uniquely positioned to fight back, and take advantage of this global crisis. But, for that, something has to inspire us to hunker down with confident stoicism, and fight back-like the Sundarji’s platoon on that second hill feature.!! "

It is time, we used our senses- looked at the fundamentals-and take stock!!

Cheers-here is hoping all of us can have a blast!! Happy Diwali!!

1 comment:

Prakash said...

Wonderful Post at the right moment.

There is too much of fear overall currently leading to over reaction on the part of the indus try.

Inspite of all the slowdown Indian economy is expected to grow at 7+%.