yeh recession recession kya hai...

Yeh recession recession kya hai…


Less than 2 years ago, the mood in the country was really upbeat.

The stock markets (BSE Sensex) was looking to breach 20000 which it eventually did, the crude oil prices were below $40 a barrel, which means the petrol and diesel prices would follow and people were freely investing in big cars, bigger houses, clothes, jewels, vacations, etc. The banks were throwing money at us, car loans, home loans, personal loans, credit cards, you dream it, you got it loans.

Then almost like a Tsunami, less than a year ago, the whole world was hit with a bomb that was more brutal than its nuclear counterpart, simply called recession.

It started with expose of the home loan, mortgage institutions with their bad investments, portfolios which included finance through instruments so complicated, in my mind even they could not decipher. All the banks, financial institutions and pension fund, trusts, fell like a pack of cards.

It started with the U.K. and the U.S., but then the domino effect it created left almost all countries completely dragged into it.

We, as Indians, are still not as affected by this, simply because we save much more and we are not totally dependent on the world at large. We don’t use credit cards and we practically produce everything we need. Therefore, we are unaffected by recession. Right…. Wrong.

No country in the world, whether they admit it or not can decouple themselves or deny the fact that they were hit by recession.

Our Stock markets, BSE Sensex crashed to almost 7000, the inflation dropped to almost 3%, simply because of lack of consumption at large and the realty, gem and jewels industry saw the biggest slump in over three decades. The airline, hotels, hospitality industry went spiraling down in losses and there were recruitment freeze, infact downsizing, right sizing or whatever you may call it but in clear terms, sacking a whole lot of professionals, skilled and semi skilled workers across all industries.

Its true that we might be able to come out sooner, because of our saving habits, etc.
I might concede here that we might also be able to benefit eventually because we might plan our spending ( utilization of resources better) and we can offer cost effective solutions to the rest of the world, not depending totally on the U.S or the Europe.

The challenge for the average middle class Indian is to recognize this.

I believe in the 80 – 20 rule. In our context, it means that 80% of Indians lie in the middle income bracket will be affected by the slowdown and the lessons they would have learned during this phase would be of great value to them. 2% of the super rich will really not be affected, as also approximately 18% of the really poor. Also, as a race we are extremely emotional as people. So therefore, when good things happen to us, we tend to go overboard in expressing it albeit when things go wrong we project it like the sky is falling on us.

However, coming back to the lessons learnt during recession.

The most important one is being conservative. I think we should all admit that because of lower interest rates, easy instalment plans, low documentation we simply could not resist.
We used credit cards on deals we didn’t need, bought homes, cars beyond our means, we didn’t care about what interest amounts we were being charged. Well the time has come to space your spending habits into priority wise and affordability wise pattern.

The other lesson is that like most countries, India cannot be decoupled. Therefore if you get an indication of the world markets take a cue from it.

However, the most important lesson or shall I say inference from history is, however, very positive. It means that there is light at the end of the tunnel or there is always a day break after night. What goes up comes down and vice versa.

Therefore, like good times, tough times don’t last forever. Tough people do.