Economic slowdown

There’s an unprecedented recession. Industrial production, demand, exports, rupee – all parameters are moving in unfavourable directions. Just read that Hero Motorcorp, the World’s largest two wheeler manufacturer , has come out with an Early Retirement Scheme and other auto majors are observing shut down of plants on pre agreed days. Even consumer durables giants such as Hindustan Unilever, Nestle and P&G are experiencing slow down, especially in rural markets. However, the root cause of this recessionary cycle – whether global, political or purely economic – is not really clear.

Some attribute it to the after effect of Demonetisation, while a few others feel that hurried implementation of GST is coming to haunt the country. A few attribute it to US China trade war, while there is a set that thinks that Government’s financial imprudence being responsible for the current imbroglio. Real reasons seems to be elusive, especially considering the following facts:

(1) Country has just elected a Government for the next 5 years with a very strong mandate;

(2) Rain gods have given water to the parched land in abundance and although the distribution has been uneven no food shortage or food inflation is anticipated;

(3) There has been no disincentive in particular to industry, including automobile, and the reason for recession seems to be mainly cyclical.

(4) Demonetisation and GST have happened sometime in the past and their impact should have petered off by now.

(5) Notwithstanding global recession, Indian boasts of large captive market and there is no visible change in the local demand pattern, save and expect some unique cases such as automobile.

Macroeconomic parameters seem to be fine and the current phase seems to be having more to do with sentiments rather than any real reason. The need of the hour for the businesses (large, medium and small), financial institutions (banks and NBFCs, ) and other intermediaries to develop inherent strength and resilience that sees them through cyclical phases of economy. Financial prudence will stand an organisation good under any scenario. Let’s not crib and discuss but work and create opportunities for a golden tomorrow.

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