December 2, 2008
The world has seen a recession; many countries from super power to no power have experienced the heat wave of recession. Commodity prices have increased to sky high and still spiraling towards north. For a common man especially for the lower and lower middle class the proverbial uncle's stick has come down very hard.
In finance sector, Stock Markets have crashed to rock bottom, people who have invested in equity seen sharp decline in their portfolio. Central Bank (RBI ) generally increase the Cash Reserve Ratio (CRR) to keep the inflation steady, instead reduced Cash Reserve Ratio from 8.5 to 5.5 and injected crores of Rupees into the banking sector to keep the liquidation going, Repo Rate has also seen in the reverse direction to have access to more funds from RBI. Few months back, the Participatory Notes which had given enough headaches to the SEBI and the Government, has now become a handy instrument for inflow of Foreign Funds.
Many large financial institutes with base in US have already announced itself bankrupt. Even though the US government has bailed out and pumped huge funds into troubled mortgages and toxic assets to stabilize the institutes, these institutes are still struggling. Because of the strong and well regulated Indian banking system, Banking /Financial institutes have not yet given any nightmares to its depositors.
Many people have cursed the government without knowing the reality. Government is giving assurance over assurance regarding safe deposits to keep the esteem high. Non-ruling political parties have not wasted any time to grasp the opportunity to bucket another issue. Even though the western countries bet on capitalism, people
started discussing role of socialism over capitalism. Some Think-tanks argue if the country had followed the principles of Marxism, we would have escaped from this
Great Evil - 'Recession'.
Projected GDP target is reducing day by day and now it has reached to somewhere around 7 – 8 per cent for current fiscal, though some private consulting firms project it around 6.6 per cent.
Realty sector has seen a sharp decline in enquiries or in new deals. Some of the market giants have already slashed prices or giving some other add-ons. Builders who have made enough profits are able to hold their projects with reduced turn-over. Though the government has intervened and reduced interest rates for various advances, the quantum of buyers are not much, as seen in the booming industry. Some builders have started marketing in gulf countries to take advantage of the increased dollar value.
Automobile industry is worst hit, some the international giants have already gone bankrupt. If we look at the Indian market, some of the automobile industries have temporarily shutdown their plants to match production with the orders. Therefore, the small scale contractors and suppliers who were dependent on these manufactures are
hit very hard. Various industries have rejected Finance Ministry’s offer to reduce the price owing to higher direct or indirect costs.
People working in the private sector are already bearing the brunt with reduced recruitment, delayed or no promotion, lower incentives and non-existent pay hikes. There are number of organizations that are already handing out pink slips. If the same situation continues for another 6 months we may see a sharp decline in foreign
funds flowing into the country along with our NRI brethren heading towards home. Some of the top foreign fund remitting countries like Saudi Arabia and UAE are feeling the heat.
Rubber plantations, once the most sought after farmland in Kerala, now find no takers because of the plummeting price of natural rubber in the last few months. People who have converted the fertile land into rubber plantation are feeling the heat wave the most. Government has already imposed restrictions on export of non-basmati rice to have a steady price and availability.
Closer home, if we take a walk in the vegetable market, vendors and consumers have created their own space. The vegetables that were selling at Rs.10/Kg, today they priced at around Rs.50/Kg. Is it the shortage of vegetables? A lower middle class person earning Rs.100-150/Day and have to feed a family of 4-5, may not take this
view of the commodity market.
In short, each and every industry has going through a bad phase. According to the industry experts, it may take another 2 years to overcome the recession.
There have been other impacts. Are they just as gloomy? Where is the silver lining?
What is the outcome of this great recession?
As UN rightly predicted it's the GREEN REVOLUTION !
"The direct benefits will be reaped by the rural populace through their own on-farm adoption, greater agricultural employment. Empowerment will be more mixed and depend heavily on local socioeconomic conditions."
As a result, People who were never been to their fields, today they are watching the beauty of their fields. People, who never knew how to cultivate their daily needs, have started learning farming skills. People who have taken VRS for cultivating crops are testing the fertility of their fields. And hence, agriculture output will increase and people will realize the importance of farming. If this inflation continues for at least another year, the cultivatable land will rise exponentially.
As a country like ours, where 65 per cent of the population depends on agriculture for a livelihood, India needs a detailed strategy to protect farmers from the impact of the recession.