The Economic Downturn and India India is not de-linked from the world, and the financial meltdown

has certainly impacted us. In the age of globalization, no country can remains isolated from t he fluctuations of world economy. Heavy losses suffered by major International B anks is going to affect all countries of the world as these financial institutes have their investment interest in almost all countries. As of now India is facing heat on three grounds: (1) Our Share Markets are falli ng everyday, (2) Rupee is weakening against dollars and (3) Our banks are facing severe cash crunch resulting in shortage of liquidity in the market. Actually all the above three problems are interconnected and have their roots in the above-mentioned global crisis. For the last two years, our stock market was creating new summits which was mainly due to heavy investments by Foreign Insti tutional Investors (FIIs). However, when the parent companies of these investors (based mainly in US and Europe) found themselves in a severe credit tumult as a result of sub-prime mess, the only option left with these investors was to with draw their money from Indian Stock Markets to meet liabilities at home. FIIs wer e the main buyers of Indian Stocks and their exit from the market is certain to wreak havoc in the market. FIIs who were on a buying spree last year, are now in the mood of selling their stocks in India. As a result our Share Markets were touching new lows everyday. Since, the money, which FIIs get after selling their stocks, needs to be convert ed into dollars before they can sent it home, the demand for dollars suddenly in creased. As more and more FIIs are buying dollars, the rupee is loosing its stre ngth against dollar. As long as demands for dollars remain high, the rupee will keep loosing its strength against dollar. The current financial crisis has also started directly affecting Indian Industri es. For the past few years, the two most preferred method of raising money by th e companies were Stock Markets and external borrowings on low interest rates. St ock Markets were falling everyday and it was not possible to raise money there. Regarding external borrowing from world markets, this option has also become dif ficult. In the last fiscal year alone, India borrowed $29 billion from foreign lenders a nd got $34 billion of foreign direct investment. A global recession has hurt ext ernal demand. International lenders who have become extremely risk aversive can limit access to international capital. If that happens, both India's financial m arkets and the real economy will be hurt in the process. Suddenly, the 9% growth target does not seem that 'doable' any more; we should be happy to clock 7% thi s fiscal year and the next. However, one positive point in favor of India is the fact that Indian Banks are more or less secured from the ill-effects of sub-prime mess. A glance at Indian banks' balance sheets would show that their exposure to complex instruments like CDOs is almost nil. In India, still the major banking operations are in the han ds of Public Sector Banks who exercise extreme cautions in disbursing loans to n eedy people/companies. As a result, we are not likely to see a repeat of sub-pri me crisis in India. Though there have been a presence of big US/European Banks i n India and even some Indian banks (like ICICI) have some foreign subsidiary wit h stake in the sub-prime losses, there presence is much small as compare to the overall size of Indian banking industry. So at least on this major front we need not worry much. However, a global depression is likely to result in a fall in demand of all type s of consumer goods. In 2007-08, India sold 13.5% of its goods to foreign buyers . A fall in demand is likely to affect the growth rate this year. Our export may

Ironically. Green will definitely get on top of th e priority list for several companies. Narendra Modi and the Nano . So the Approvals for power plants and infra project s are likely to be speeded up. * Recession is a great time to undo the mistakes of the past. India can be at the head of the pack * New avenues: Green is a new $50 billion opportunity. we could see a drop in inflation as well * There is a distinct Indian middle class which is growing to be a powerful spen ding force. This recession as a huge opportuni ty for India to rebuild itself in the eyes of the world: Some of the Opportuniti es are * Dropping commodity prices. A negative atmosphere. compared to the less educated millions. The costs of land will fall. The myth of IT an d the glamour if private jobs are all history now. ensure that construction cos ts are sure to go down. there is certainly a deep recession as far as jobs for the highly edu cated are concerned. By the t ime the cycle turns. Indian companies who have focused on the west can now focus inwards. Despite all thi s. and industries can acquire large chunks for industrialization. and that will help the country (likely to be the third biggest polluter by the end of this year) * Repatriation: Indians across the world will sense the building of a new story. Costs of imported coal will stabilize. and t urn them around using Indian marwari and bania management philosophies. this may be the first time in India's history w hen it is more difficult for the professional graduates to find employment or ap propriate employment. and this means that if the prices of petrol and dies el are cut in India. shortage of cash.All three will bloom over the next two years. Now in an age of pink slips a nd mounting recession. They will grow in hundreds of our new futuristi c communities and SEZs. * Elections were on the way. hence contributing to productivity and prosperity. India should cash on these opportunities for better g . This should definitely help in making infrastructure and construction more viable * Crude prices are falling. The supply crunch in various commodities is likely to get eased over the nex t few month. An Opportunity in Disguise With every dark cloud comes a silver lining. changing the face of India along with them. like steel and cement. Recession always makes in dustries look for new ways to make money. And again. The present job re cession has also hit the aspiration level of the Indian youth. the Indian Youth is once again looking in public sectors for jobs. Talent will come back to India. This influx of money into the economy is likely t o have a multiplier effect on the economy * Global M&A: Indian companies can acquire companies worldwide very cheap. and Indian power companies can generate much mo re.get affected badly. New and cultured India will bloom The 3 N's: Nuclear power. growth might slow down. reducing growth rate a nd uncertainties in the market are some of the most visible aspects of an econom ic depression. fall in demands. What started as a small matter of sub-prime loan defaulters has n ow become a subject of global discussion and has engulfed the global economy sce nario.

However it is important to note that most divestitures to be made must be of divisions that are not in-line with the company's long term strategic view. At face value these divestments will be a part of a strategy of cutting costs and/or generating short term liquidity. such that when the economy turns. the companies quickly assembled a plan and put in place a strategy for dealing with adverse conditions. Flexibility will allow the business to im plement their recession strategies quicker than competitors. Companies who did diversify and split focus away from their core competen cies often struggled to manage their unrelated businesses whereas companies that remained focused. we would be in a position to really b e then next China Marketing Strategies to Battle the Recession The fear of a recession looms over the United States. This is important as it demonstrates it is never too late to act. not just for India. * Strategic divestment Most companies should divest parts of their business during recessionary periods . we should view this as an opportunity to build o ur base. The ' entry price' is likely to be lower than at other times as businesses are sold un der stress or to liquidate assets. whenever the US sneezes. or re-focused on their core created opportunities to gain mar ket share more easily from their competitors. in all cases when the downturn hit. Weakening of the American economy is bad news. It is logical that process efficiencies will be so ught to trim costs from budgets during a recession. This means that companies can purchase target . particularly where less profitable divi sions were divested. However. * Contingency planning Companies should actively plan alternative strategies for adverse times well in advance of them occurring. All the companies should ha ve the flexibility and must be fast action oriented as these are the key to surv iving and prospering during recession. In some cases horiz ontal management structures will also directly attribute to the speed with whic h companies were able to integrate acquired businesses successfully. And as the obvious remark goes.rowth and development. divestment is primarily used to raise ca sh to service debt and fund further investment. or differed from the company's core-bus iness. businesses will have to do everything within their power to brace for the c oming storm and survive the bad times * Focus on core business All companies should focus on their core competencies during turbulent economic times. * Acquisitions and strategic alliances There are several reasons why acquisition of competing or allied businesses is s een as a good strategy by some companies in a period of economic downturn. With new uncertainties r aised by the attacks and many economists forecasting a deep and prolonged recess ion. This is evident from th e way the Indian markets crashed taking a cue from a probable recession in the U S and a global economic slowdown. the world catches a cold. * Improved process and efficiency A common theme among the companies is the process by which they implemented thei r strategy during recessions. as these companies will survive turbulent times despite having no s pecific plan for the recession. For the companies. However. but for the rest of the world too.

the company should get everybody in the team to think lean. As much as possi ble. Solicit feedback from t he workers and customers. Conclusion In the globalized market scenario. There may also be less compet ition for acquisition targets because few companies make available the resources to make acquisitions during periods of economic stress.s that may otherwise have been out of their reach. they can help to transform one's outloo k for the future. there will be people whose businesses go under si mply because of the speculation about a recession. They must do this by prioritising development of th e most promising products that met the immediate needs of their customers. By doing several of these things one will accumulate a wealth of knowledge and experience crucial to the survival of your business. Th e idea is to eventually be as efficient and effective as possible so the company runs smoothly and profitably. the marketing needs to be more aggressive and more comprehensive than ever. make sure that one have the right folks for the job. as they struggle to deal with a downturn. Most companies s hould also try to increase their speed to market with new products to gain advan tage over their competition. Companies should look closely at the competitors. It's incredibly sad but it's a fact and it's happened all throughout history whenever the economy has faltere d. and one can't simply splash advertisements ad infinitum like the re is no tomorrow. and employee performance. that have previously been unattainable. One should be constantly re-evaluating not just the marketing plan. but if we combine several of them. . pricing. Talking to business leaders will also help. but all of t he business strategies including policies. This recession have turned down the growth process and have se t the minds of many for finding out the real solution to sustain the economic gr owth and stability of the market which is desired for the smooth running of the economy. * Increased advertising and marketing One of the biggest mistakes business owners make during periods of economic slow down is to cut back on marketing and advertising. the impact of recession at one place/ industr y/ sector percolate down to all the linked industry and this can be truly interp reted from the current market situation which is faced by the world.Advertising was used effectively by these companies to help weather downturns and strengthen demand for their core products. Experiment. These recession strategies won't turn the business around when used independe ntly. Instead. Chances are a good number of them will have projects or assignments for which the company's se rvices may be required. One should start by contacting past clients and simply touching base. Whether a g lobal recession occurs or not. doing this could be most detri mental to their business . Extravagance be comes a luxury. * Human Factor Finally. * Research and development The companies should use R&D to meet the increasingly diverse needs of their rec essionary customers who seek greater value from their spending. Sometimes businesses be come available for acquisition.

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