We have seen worst in the last quarter and even during the beginning of this New Year. We were unable to properly welcome 2009 because of the global crisis and credit crunch. But what I am hearing form all around is the worst is still to come. What will be that worst even a blurred thought of that shivered me to the bottom. So instead of thinking of the worst, I tried to analyze things and tried to find out are there some facts that really backup the predictions people are making or it’s just a negative aura around people which forcing them to say like that. I can see in the last few months to cope with the economic crisis RBI and Govt. had taken lots of steps and so do the retailers and manufacturers. The Reserve Bank swiftly initiated a series of measures, which helped to assuage liquidity conditions, while reassuring the market that the Indian banking system continued to be safe and sound, well capitalized and well regulated. And because of some of the steps taken by govt. we saw an increase in consumption demand mainly reflecting rise in basic exemption limits and tax slabs, Sixth Pay Commission awards, debt waiver for farmers and pre-election expenditure. So there is still consumerism prevailing in the market, there can be different factors for that like the policies and measures taken by govt., reducing oil prices, bumper promotions given by retailers, reduction in inflation, decline in WPI driven by decline in prices of minerals oil, iron and steel, oilseeds, edible oils, oil cakes, raw cotton. Also retailers are controlling their inventories and manufactures are regulating their production, Manufactured products inflation, year-on-year, also moderated to 5.9 per cent on January 10, 2009 as compared with the peak of 11.9 per cent in mid-August 2008. So the policy measures are now in place and many other are in pipeline which resulting as a healing effect for the situation and I can see some stability in the economy. And as far as consumer behavior is concerned, Most of the consumer behavior we saw in 2008 will continue well into this year, Rosalind Wells, the National Retail Federation’s chief economist, predicts “Shoppers will be seeking value and trading down to discount and off-price retailers in order to stretch their purchasing power.” indicating shoppers will shop.
The GDP growth declined but it’s still positive and there is still GROWTH. I might sound too optimistic so using this open forum I will appreciate reader’s comments on this topic. I know in the back of everyone’s mind this is a question- “Are there any signs of recovery?”
- Prateek Katiyar
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February 4th, 2009 at 6:27 pm
Prateek,
Good that you brought this thought out, I have always looked up to this word “recession” as synonymous to growth. When we start building too many houses in the air, there is a need for a check, and this is what recession is doing. Asking people to hold there money, and make right investment decisions. The whole economy needs to move together, and this is what is happening now.
Economics has always scared me, for I never understood the concept of invisible money, credit and EMI’s.
Growth is there, its just going in a different direction…
February 4th, 2009 at 7:16 pm
Sarthak,
yes growth is there but may be misguided. and as far as the connection of recession with growth is concerned, i would like to quote an example of Warren Buffet, who grew his income in billions during this recession. So when for some people recession means loss, credit crunch, less customers for some it means solid cash, but leavening that thing apart and coming back to my “Optimism” I believe in a sunny day after a dark night, but the question is “how long this night will prevail?”
February 5th, 2009 at 6:41 pm
credit money is created as say i invest 100 Rs with a bank and bank gives it as loan to another 2 people. the whole amount of loan is not given in a day,it is discreted rather in a time frame,and during this time frame bank will use this money for another purpose.nd thus 100 rs note has been in market in 3 different places at a time .thus there was more money in market to trade. thats why i do feel credit money is reason for this crisis.as there is a lot of money then wat our market needed which led to inflation and rise prices in air i dont know meaning of invisible money.
and ofcourse the growth is there where it should be thus gdp is positive and there are reasons for recovery.
this is wat i feel.