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.
- The upper class
- 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.