Recession 2008 vs Recession 2013


Recession 2008 vs 2013

Recession 2008

By the end of 2008, most of the developed countries had accepted that they were facing recession. The worst effected was US and since it trades with most of the world, directly or indirectly all the economies linked to it suffered a blow.

Back then, India was doing better. The growth rate was poised to be higher than 2007.

So, how come we were better off than the developed countries?

We were still a relatively unexplored market. Before 2008, there were a handful of foreign based companies that had established itself in India. Indian market wasn’t considered viable because the media always portrayed us as a country having only 2 classes.

  1. The upper class
  2. The poor.

But, by 2008 a new class had already made its presence felt. The middle class consisted of people associated with the service industry and with a fixed yet decent monthly income. As consumers, they didn’t have much option but to opt for locally manufactured products. And since the local companies didn’t have much competition, the products were low on quality.

The middle class was already educated about the products, coupled with the FDI policy that allowed foreign investment in a restrictive manner, led to plethora of foreign companies forging ties with Indian counterparts. Using their expertise they smartly launched products and aggressively marketed them and made phenomenal profits.

A small hit that we took was absorbed by the black market economy of our country. There is a parallel black market economy, which, if not bigger is as big as our white market economy. So, on paper we were doing great.

Recession 2013

Now, our country is saturated with foreign investments in all those fields opened up by the government. Rest of the world is again in the pre-2008 recession situation and US is about to face election this November. So by June 2013, president of US will have to declare recession (i.e. unless a miracle happens).

This time we aren’t new, fresh market and thanks to the scams, foreign companies are almost on the verge of pulling out their investments (Think Uninor & others…) let alone invest more.

We won’t be in the state of recession, but we will take a bigger hit than we took in 2008. Since no new money will be pumped in, the economy won’t jump like it did. Both, white and black money in circulation will be hit and inflation will go up.

Unless we open all the sectors for FDI, it will be hard to flourish like we did in 2008 even on the back of global recession. But opening up has its own risk, as it allows the company to wind up its operations overnight with little or no responsibility on the parent company, leaving the Indian investor in lurch.

People without jobs will have to work harder to find them or add a few skills (certifications) to show their credibility. And the ones with job will have to work harder and add skills along.

We will still be on the safer side. Thanks to our values which guide us to save more and invest less unlike the US.

Hold that wallet tight, pull the purse strings hard, we are in for a rough ride and it is not going to be pretty.

  1. Raghav N Kammar says

    Is it effect to Indian Market and Job seekers?

  2. Ravi Singh says

    I think that is very well summarized. Also not to mention how stupidly most Indian firm operate. I think most Indian firm cant even surivive if they can't make 100% profit on their investment, so bad is our operational capability. Horrible. But wait a second doesn't this open door to new generation of bussiness , who can churn out more profit by tighter operations, better knowledge and use of advanced tenchnology.

  3. pullingam says

    it will be recession and our lives will get affected. there haven’t been good jobs in india since 2008 and all recruitments have had their spate of high politics, hypocrisy and favouritism. if there is one more severe recession everybody will be finished. it is like seeing a huge trough in your career when you virtually did either nothing or took shelter somewhere to save your face from the ignominy of being unemployed.

  4. Devendra Lingojwar says

    Yes, this is true.
    Housing property is nothing but a big bubble. Nobody should buy house this time. wait and watch for next 2 to 3 years. Prices will come down.
    After all all these IT employees are dependent on DOLLARS and wants to enjoy in rupees. How long policy makers in the US will provide outsourcing to INDIA and CHINA.
    Those who invested in developing and building till 2005 -2006, are now in profit. But the newcomers who wants to invest now as builders wont get returns because that golden phase is over.

  5. seriously says

    It amazes me how insular India still sees its self.

    India’s wealth came from Europe & America. Who both stopped spending 5 years ago, nobody told India’s newly found middle class wealthy who invested previously productive capital (which used to be used to expand business) they locked this money into unproductive property. So if your thinking about investing in an apartment for anything over 10000usd, think again. Property is NOT driven by supply and demand, just take a look at every major Indian cities huge backlog of unsold stock, which is in excess of ten years worth of new sales.

    Why Indias new middle class is in trouble
    House prices are based on income, usually 3.5 to 5 times pre tax income. India’s average wage is only 1200 usd a year. Only rising to 4200 by 2020 about 10 times less than Europe.

    A house in India is the same price as a house in Europe, where wages are 50 times higher.

    The IMF has warned of an Asian economic slowdown. Chinese growth under 7% is actually negative growth due to the way they report their figures & inflation.

    Tax in India will rise.

    House prices will fall 70% from present bubble figures.

    India has gone through the fastest housing boom in history. Its correction will be painful for the new middle class.

  6. asfasf says

    Consensus is never true. in 2007 no one knew 2008 will be a recession year and it was. in 2012 everyone is saying 2013 will be a recession year but it won’t be.

    1. Sudarshan Rangarajan says

      I beg to differ, by the end of 2007 everyone knew about the impending recession looming above their head. Even Obama in his campaigns had clearly stated that the economy will fall further and then it will rise after structural reforms. If am not wrong he actually mentioned it will be like a tick mark … it will go down and then rise up

    2. seriously says

      Most educated people saw it in 2006. It was the idiots jumping on the burning bandwagon that tipped property over the edge and dragged it out another 2 years. Indian property is being marketed to foreign investors, very dangerous time to buy. They are desperate to find new idiots. Take a look at the number of unsold property in indas big cities and compare it to how many are sold this year. There is 10 years worth of unsold stock.

  7. Shalin Shah says

    I think he is right. The one holding on cash will be the king in next 5 years. But don`t stop investing. More the seed more then tree…..

  8. Ashok says

    How you are sure about 2013 recession???

    1. vivek says

      same question?

      1. simplysud says

        global cues are the same as they were pre-2008
        slowly all the countries are facing the same situation again
        European crisis has been temporarily resolved with bailout and now they will have to restructure their economy to prevent any further situation of the same kind and till then they will be in a recession
        US faced crisis in 2008 and since then there has hardly been any sort of restructuring and hence 4 years later the bailout money has dried up and the companies have started to limp again
        India (Asia in general) is no longer the fresh open market it was, and now all of us are facing slowdown
        in India if you are aware Inflation is the index to look out for
        same way in US its the unemployment % that is checked .. and those numbers don’t look good

  9. aditya trivedi says

    India adds at least 2 million graduate to its portfolio every year, now we need to provide them jobs.. since international market is not doing good they need to start in india. Even if India gives FDI then its domestic market will take a hit, because of which it had survived 2008 recission. Govt, doesnt have money to invest in subsides which it will pull out soon.. what remains is if we can start all under construction projects we have funded by world bank to fund our people with money.. Tons of project on waiting list is the result of this crisis

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