What’s in India….?

Ask me what not….?.Though this is not the first time that us in recession, I would like to define it as the first recession that us is facing in a flat world scenario.

What’s a flat world scenario….?

World has been defined to be spherical in shape considering its geometrical proportions. but the fast developing economies such as India,china,brazil,Russia(the BRIC quad) redefined this to be flat with technology becoming over reliable, information becoming hyper critical coupled with the biggest weapon called intellectual capital in their arsenal. Now these countries have established themselves as economic power houses making the world a flat playing field against the past America dominated world.

(To get an insight into the flat world do read ‘the world is flat’ by Thomas Friedman)

Impact of us recession on Indian economy….

As I have already said the fast-growing economies of Asia and the still-dynamic European area represent the best hope of avoiding a severe global slowdown. The effect of the us recession on Indian economy will depend on how far the Indian economy has decoupled from the us economy. though the Indian economy hasn’t completely decoupled from the us economy due to globalization, the strong growth and development in india,increased intra-Asian trade and vigorous European economy have led to significant amount of decoupling and thus substantial independence from sagging American economy.

India and the other fast developing economies will be able to pull along a contracting US economy rather than being dragged down with it.

Following may be the probable impacts on the Indian economy put forth by kaushik gala of gala time

1. If the US Federal Reserve cuts rates while the Reserve Bank of India (RBI) maintains or increases them, the rupee will strengthen further against the dollar - perhaps crossing 43!

2. Given the high degree of correlation between markets worldwide, Indian equities will likely follow US equities downward, but the fall might be cushioned by a better domestic economy.

3. Gold is unlikely to do any better during a recession, until inflation continues to rise even as economic growth stagnates (stagflation).

4. The IT sector will suffer from slower growth, but be compensated by even more jobs getting outsources to India, as companies cut costs in the US.

5. Commodities will get hurt as the various booms (residential & commercial real estate, infrastructure, etc.) peak out - thought that doesn’t seem to be the case yet!

The big bonanza in Indian perspective

I believe that this us recession is going to be a blessing in disguise for the Indian economy. There has been an unprecedented level of industrialization and entrepreneurship endeavor in the past few years.

People who have money started floating companies and people who doesn’t have money started getting jobs (thanks to the many economic reforms brought out by the UPA government).there was no stopping. But now with recession looming in it’s going to be ‘survival of the fittest’. It’s going to be tougher for them. The companies need to act smart, think smarter and be the smartest to stay afloat.

They have to insulate themselves from the depressed us economy. They have to seek and develop alternative markets, which so far have remained relatively untapped. Apart from that a relatively untapped area lies very close to us, the Indian rural area. As I have put a great thrust on rural retailing in my first post titled retailing in rural India.

The following article ‘how bharat could save India from us recession’ published in times of India would be of great supplement to this topic.

This is a phase of evolution for the Indian economy before it takes the top spot as biggest economy in the world.