Impact of recession on Indian companies

Worldwide this is an accepted fact now that the world economy is facing biggest recession in decades. But Indian politicians are reluctant to admit this fact for Indian economy. Even Indian companies are not much talking about recession and keeping the bad news of lower profits or revenue away from the media. Or the media is not willing to highlight the issue of job losses in Indian. There might be political reasons to do so or just they are taking the role of populist (and not popular) media and talking about bollywood or Pakistan.

It is true that Indian economy is still not much dependent on export. It is still driven by domestic consumption. Though we can not forget the fact that the whole India shining or 9% growth was driven by a very small fraction of next generation. This urban population did not had much money, though their earnings were much more than their parents, but they had a dream to sell to the banks to get a loan. Banks were happy to lend to someone who was earning in 6-7 digit every year. Economy was running on debt from the banks.

To see the impact of this unmanaged growth, one need to visit any town that has got IT industry in recent past. One can see the vast change on the speed of the private transport. A town with small roads will have almost empty roads before the arrival of IT industry but after the arrival there will not be any space on the streets. If someone goes to Noida-Delhi or Delhi-Gurgaon highways in the peak hours then s/he will realize how many cars have been bought by these young IT professionals. They helped the auto industry for last couple of years. But the time has changed now. It is not people have lost their jobs, but people will not be willing to buy new cars any more.

One should not forget that the developed world where we were exporting, whatever limit we export, has been hit hard. When I say hard, I mean it. Consumers are buying but only what is necessary for survival otherwise the spending has almost dried up. In this scenario, I doubt companies can expect to get any, if at all, contracts for non-essential items. Indian companies might not resolve to fire employees, because this is not Indian culture, but I doubt there will be any salary rise or new recruitement.

I am optimistic that none of the known big company will go bankrupt. We will not hear that companies are going into administration but the overall mood will be low and the companies will not make much profit after tax.

So far so good. Indian economy is safer. But if the recession prolonged then the remitance by the NRIs diaspora will also go down that will drastically reduce the consumption in India. Lets hope this does not happen.