Thursday, December 25, 2008

US ECONOMIC CRISIS , ITS LONG TERM IMPACT ON INDIA

STAY OPTIMISTIC, NO MATTER WHAT GOES BY!

Inspired by the situation of friends around me who are not getting their expected joining dates after getting placed in popular multi national companies, I have analyzed the current economic recession in terms of the economics that i understand. As a true patriot, i visualize, long term national stronghold of my country in the soon to be emerged scenario and i am positive about the impact that this period of suffering will proved us later. Lets start with when and how this current recession came into our knowledge.


This fall of American economy was clearly visible and accepted when three of world's biggest investment banks Merrill Lynch, Lehman brothers and Washington mutual have disappeared. Merrill into the arms of banking behemoth bank of America, Lehman into bankruptcy and as if that wasn't bas enough, the US reeled under the news of the biggest bank failure in its history, as federal regulators on September 25th seized the largest American savings and loan institution Washington mutual (WaMu) and brokered the emergency sale of its assets to JP Morgan chase for $1.9 billion. With assets worth $307 billion, marked the biggest failure ever, the previous one being that of continental Illinois in 1984. to make the matter worse, American international group(AIG) once America's largest insurer has been virtually nationalized. As expected, this has sent shock waves through the world's stock markets, after all for the better part of a little over 150 years, these have been some of the most celebrated names of wall street.


It seems to me that the root of the market collapse is the fear that banks and other institutions still hold too many “toxic assets”, which are based on mortgages that are now going bad. The decade of 2000s saw a commodities boom, in which prices of primary commodities rose again after great dull period of 1980-2000. but in 2008, prices of some commodities like food and oil rose so high that they caused a reversal of globalization. In January 2008, oil prices surpassed $100 a barrel, the first time ever and most shockingly it has reached $147 by July. I consider this as the start of this tough period.


There was a constant decline in value of dollar right from start of the year, in February alone 63,000 jobs were lost, a 5 year record. The year 2008 as of September 17 records has seen 81 public corporations bankrupt in US alone, already higher than 78 in 2007. Lehman brothers being the largest bankruptcy in the US history with assets of $691 billion.


INDIAN ASPECT

I think that the American crisis may be India's chance. The global economy will no longer be driven by two or three trading blocks. East Asia is the real place of action now and India will be one of the major engines of growth. I expect that the country will continue grow at the rate of 8%. Even though the stock market will suffer but The Indian financial market will not be affected by the US crisis much or we can say it will be less affected as compared to other national markets as it is not mortgage driven and has low exposure to real estate. Recovery from the global financial crisis will be slow process, this we all know, but India will weather the storm through domestic capital markets in India and the high saving rates will take us forward. Inflation which is our major concern in all this will probably come down in the future. I expect that Domestic savings will rise to compensate the decrease in foreign investment. The biggest risk is for Indian software which has thrived largely for decades on finances from outsourcing US firms. The delay in joining and resilience to new intake is actually a result of this TCS will suffer most as it has 42% revenues in this segment while Wipro and Satyam too have 25%-35%. I also predict the rupee to touch the low of Rs 50 against dollar soon.


But saying all this, i would like more of our youth to focus on the larger long term gains and the improved domestic situation that they might face in the years to come, one should always think positively, thats my theory!

Constantly i also see our Indian citizen's shouting against government for not utilizing their taxes properly, a similar event was seen in America in the end of 2007 and bush government suffered the set back of this anger in the elections. I would like to tell those American citizen's who were debating the waste of tax payer's money money in waging wars against Afghanistan and Iraq, a total of $900 billion of taxpayer's money is expected to be used to bail out financial giants, five times of $ 182.2 billion (estimated expenditure for war on terror in 2008). So please fellow citizens of India never ever hesitate to pay your taxes, thats an advice from my end to everyone for their benefits in the crisis situations like the one currently visible in America. Stay optimistic and always remember “to win a boxing match, your ability to bear the punch hit on you is equally important as your strength of hitting a punch on your opponent, face the economic crisis with the positive approach that this will also pass”.




10 comments:

Salman said...

first thing first -- read your post twice before you publish it Pulkit..In first para I found a spelling mistake and so many times you have used "i" in place of "I". These are lazy mistakes which you must never commit. And you know why I say this.. :)

About the article -- you started well. First few paras were researched well and you worked hard to bring out the reason why all this is happening but you know in last few para you shifted to "how one should face this recession" instead of concentrating on "what happens to India during this period". The sentences are as usual great but you mixed two different topics and that is what makes the article a little confusing.

I hope you understand this and will take this as constructive criticism :)

PULKIT said...

yes! for sure sir! will try not to repeat the lazy mistaked(the use of small I and all,and will try to come up with better work) thanks for the comments! they mean the most for me!

Abhinav Agarwal said...

So a migration from poems and lyrics to economics :). It is good to see you writing on disparate topics. This post has some nice information and content shows that you researched pretty well.
However here is my 2 cents of advice. As Salman already pointed out, be careful with spelling and grammatical mistakes. This might turn out to be an Achilles heel for such a good blogger as you. You could use MSWord to eliminate the overhead of you finding the basic mistakes.
Other thing is the nautanki TV on your blog page. This is really a turn-off .Every time I open your blog, this piece of crap turn on automatically. Please rectify this.

Overall, this blog is really a nice try. Keep up the good work.

Best wishes,
Abhinav

Stephen said...

Nice post dude. Stay optimistic, thats the right thing to do first. :D

-stephen from http://bigcashmaker.blogspot.com and http://contestvalley.blogspot.com

DIVYA said...

Rating you only as a psychological and emotional thinker will be a mistake by us.
You proved this wrong over here, well a very good attempt by you again and yeah what Salman said about mistakes..well your such mistakes are in other articles too :P :P ;) with spelling mistakes, but yes you tactfully hide out and cover up your mistakes by your erudite writing.
WELL DONE!!

PULKIT said...

@ abhinav - thanks for the comments bhaiya! meant a lot for me, hope to see you in the comment box again!

@ stephen - thanks for the visit, hope you had enjoyed your stay on my page and will return soon, i will check your blog positively

@ divya - thanks mam, your motivation is always my strength, with friends and well wishers like you, i have nothing to worry in life

jai said...

nice one pulkit...i think dis is ur first one on economic topic...a good start...
bt u missed something really important..u told us about commodity boom nd etc. etc....but u missed root cause of this great depression of US economy...THE SUB PRIME CRISIS....total loss from this crisis is expected to b around $2,000 bn...(size of mittal-arcelor of lakshmi niwaas mittal is just $45bn)

if you see from indian aspect...next 5 yrs are vry gloomy...the sensex,pulse of indian market is plummeting day by day..coz indian market is FII(foreign institutional investors) driven...these investment banks had invested heavily in indian markets....bt now when they r incurring high losses in their own country...they are with drawing money from developing markets like india...this is the reason of sharp fall in sensex...coz FII's want to sell shares bot nobody is ready to buy....valuation of evry company has gone down drastically..
in long term may b india will recover from it...bt v need some serious steps...our fundamentals are right...bt v need to improve our infrastructure.. bail-outs may b new buzz word bt it will not help us in longer run....

overall it was a nice attempt..nd u succeed...keep up the good work....best of luck

Ekam said...

Nice post Pulkit . I hope by the time , I graduate , the situation improves.

neha dhamija said...
This comment has been removed by the author.
neha dhamija said...

Hi Pulkit
What I think in the present scenario is that this is one of the best opportunities for India to prove its potential. It is true that the investment by FII's has been a major source of funds which was sincerely required for India's infrastructure growth, especially after the crises India went through in early 1990's..But we have been extremely dependent on these investments and anyway we were trying too hard to ride on the stock market. I expect that the stimulus package introduced by the Indian government would surely provide impetus to our otherwise slowing economy. The cut in Repo rate, interest rates and excise duties, increases in public expenditure and other concessions by the GOI and RBI are the kind of policy measures that are required in such pressing time. I too hope that domestic saving will rise to compensate the decrease in foreign investment. Though we do need to transact in the global market as no nation is self dependent to fulfil its all needs, this is best time to create some kind of immunity from the global market fluctuations. We have many great economists and policy makers that can surely change the fate of the country.