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.
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”.