Recessions in India

I have been in my profession for last 16 yrs since 1996 when i started out as fresher out of my esteemed campus. This as i count is the fourth cycle of recession since then. Incidentally, this time span can be drawn parallel to opening of Indian economy after 1991. Each recession had varied factors leading to varied, varied experiences and varied response by various entities involved.
Let us start by definition and cause of recession.

Recession is defined as significant decline in economic activity lasting more than a few months, which is normally visible in real GDP, real income,employment, industrial production, and wholesale-retail sales.An economy typically expands for 6-10 years and tends to go into a recession for about six months to 2 years. A recession normally takes place when consumers lose confidence in the growth of the economy and spend less. This leads to a decreased demand for goods and services, which in turn leads to a decrease in production, lay-offs and a sharp rise in unemployment. Investors spend less as they fear stocks values will fall and thus stock markets fall on negative sentiment.Though, i do not have direct experience for span between 91-96 as i was cocooned in distant campus, experts may fill in with some more insight to that time span. Though as per IMF study period between 91-93 was also termed as recession but that can be attributed to past closed economy effect spilling over post 91 era. Also any study prior to 91 is not relevant today as our economy was sheilded from worldwide trends.
As per IMF definition first recession was in 97-98. This recession righly was involved in core sector as new economy sector was fledgeling and with Y2k indian IT story just had no stopping. But volumes very just about getting to grow. Cong govt was replaced by not so strong Devegaouda and IK Gujral governments (Surprisingly PC was in charge then as well). The demand for core goods dropped. There was real estate correction in Mumbai, Auto and ancilliaries demand dropped. I remember all small PCMC Telco dependant suppliers faced shutdowns. and finally there was great Asian crisis impacting finance sector and banks. The great Asian meltdown reminds me of black monday back then sensex dropped for record %.
All this while US was ruled by Clinton and economy was booming which benefitted Indian IT and new economy was grown which took out entire economy out of recession in 99 or so. Also indian politics was stable with BJP government supporting telecom and other disinvestment reforms. Tata indica project revved PCMC belt by the end of millenium.
Then can the great rally of dotcom boom. The markets were bullish with stories of hotmail, junglee, mergers and acqusitions. Portals were coming up. STPI scheme helped mushroom the IT sector. Every builder, seth and panwala registered IT company. Companies retrained Y2k engineers to Java and anyone knowing J of Java went to US. Remember Job markets then.
And then came the bust, suddenly. Dot com valuations were busted and then came 9/11, anhrax, sars, afgan war. Thus every sector was touched be it banking, airlines, manufacturing. IT companies struggled. The same engineers went to US came back and strugged for jobs. I remember plights of freshers out in those years. Its all about being born in right year, as Malcomn Gladwell says in Outliers.  It took late 2003 buyoed by ITES story arising out of second wave of IT, opening of US economy that revived market. India started looking beyond US for new opportunities. Thankfully indian govt was stable all round while modernizing core sectors, stress on infrastructure: port , golden quadrilateral. Economy flourished and 'India shining' feel good factor ads which had some strange connotation in Indian politics were screened in media.  Thanks t o strange ways of indian politics, then came UPA1 govt supported by left. Though Left policies dreaded by stock market were kept at bay shrewdly by team of MMS-Pranav-PC and Sonia. The same team as we now flounders to keep abreast currently. The economy boosted by presence of MMS continued to rally till we had US subprime crisis hitting our financial sector. This time it was the finance sector that was impacted first and effects felt all around. IT sector was impacted by US situation and politics of Obama against outsourcing. Realty sector was hampered by financial lending crisis. There was correction in prises. UPA 1 did well to manage financial policies and kept the global meltdown at bay. Key decisions like nuclear deal, monetary reforms were made. Banking sector fundamentals shared from much maligned preliberalization era helped us.
Then came UPA without left clutches. Market was optimist now that reforms will be pushed. US market started recovering slowly. It took 2010 for US ecomony to look upwards. This time the up circle was shortlived (which normally is 4-6 years). By 2012, thanks to Eurozone crisis, arab iran crisis impacting oil, japan earthquake, china slowdown. India this time floundered due to lack of policy making and political will.
The policy freeze has lowed down foreing investeor confidence and thus rupee weakened. Inflation doesnt allow RBI to cut interest rates. International oil and faling rupee has create BOP crisis like that of pre91. Are we back to pre91 days. Thus cycle has been completed and recession cycles amidst were mere storms in tea cups. This sounds ominimous but we are headed towards Depression. Last time liberalization bailed us out thanks to PV Narsimharao's political will (not MMS who is wrongfully credited). This time what will bail us out. Monsoon also seem depressing till now. Does is call for new elections or war?

Heat is On...Waiting for Rains

sorry for no show in May due to work and vacations....

There is heat all around. Summer vacations have come to an end and all kids will soon start new academic year. Summer vacations have been spent. IPL over. Travel plans executed and photo albums uploaded. Mind still refuses to come out of those nice spent holidays. Mango season in over. Summer camps, swimming classes, hobby classes all coming to an end. Aroma of new books, uniforms, bags takes you back to your school days which were simply priceless. One one thing missing : rains. Monsoon progess is studied by govts, economists, stock markets, water suppliers, tanker loobies , railways, and we all the aam people of this special country. Hope all is well on that front which will we know soon.
But all is not well elsewhere and there is heat everywhere. Common man is facing heat of inflation. Food costs have gone up. Petrol though has cooled down a bit but govt still refuses to pass on that relief. Having studied balance sheets of all oil companies one wonders whether loss accounts claimed by govt are for real. Having supported privatization and opposing subsidies, it makes any cry for government control over oil prices something of double standards. But after having studied the taxation of petrol, it highlights pure mismanagement. There are anamolies like selling deisel to mercedes over at same price as to a goods carrier. LPG distribution are marred with rackets. But who cares. On one side we had bumper crops and other side we have inflated food prices. Middlemen benefit, farmers commit suicides. Politicians thrive.
Heat is also on toll as MNS promises their style of protests. Toll is simply a big organized loot. We need to study BOT model. Build fine, opertae fine, recover money only till point cost is covered. Toll cannot be forever when we have BOT mode. Certain maintainenance costs are applicable but cost recovery and maintenance should be rationalized. Its heard that this racket goes all up till delhi with very big names involved in political spectrum. But who cares
Heat is on finance ministry when S&P has warned that India might be the  first BRIC country to fall off. I assume major ecomomic fundamentals still are ok but the problem is policy paralysis by the government. No economic decisions are taken out of politcial compulsiosn. Corruption is undermining policy making. No political will. Multiple power centers are affecting executive. Non constitutional institutions like party high commands prevailing over most powerful PMO. Heat is on Rupee which has taken serious beating.
Heat is on fight against corruption. The anna movement which gained popularity in 2011 has been maligned systematically by govt and opposition. Political class has shred crocodile tears for losing sovereignity of parliament to civil society while ignoring own abuses to same cause. Fight against corruption has lost venom. All corrupt people like kalmadis, rajas , tainted maharashtra ex cms, army officers , beurocrats are out  and acting publically as if nothing has happened. Public has lost its last hope.
Heat is on talwars in unending whodidit aarushi-heraj saga and their trail by media.
Heat is on Doctors who have decided to shoot messenger like aamir khan. Yes aamir might be taking crores for episode amd he might have abandoned his first wife but thats his professional and private life. And are all points taken up are not real? Carry on doctors...
Heat is on presidential polls as if president office matters. Even PM post can be a rubber stamp appointment so leave aside president post. By all means we can have some convenient posting. Current incumbent a clear example of whats wrong with system. President house image has taken sever beating. Dirty politics is on. Sometimes i wonder if US style presidential system can work better than our parliamentary system to help us eradicate evils of election process, have people clear say on policy matter. That can give executive clear mandate to take decisions. Ofcourse some safety intrelock like election commission like Lokpal or some watchdog to monitor executive. anyways such reforms can be thought only in dreams. Even constitutional lokpal introduced in 60s cannot hold its charge.
Heat is on in Eurozone to take some calls on reviving failing economies. Though experts prefer speculating on Eurosoccer matches over stocks.
Heat is on London as it waits for olympics. Heat will be on Indian players to compete there. But with people still at helm at IOA, no hopes can be nuturtured.
We all now wait for rains. Rains to cool us down. Rains to make farmers happy, Rains to reduce water cuts, Rains in form of govt policies to stop slide in economy. Rains to stop fall of rupee. Rains to attract foreign policy. Rains to revive fight against corruption. Rains to ease out inflation. Rains to give politicians sense to prevail in ruling matters and appointments. Rains to reduce prices of oil and rationalize tolls. Rains to solve our problems. But we have seen rains in past creating havoc as well clogging our progress and disrupting our lives. So wishing for a balanced rain needed for a bumper harvest. am i not asking for too much?