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Optimistic India-In the Times of Recession

Optimistic India-In the Times of Recession

 

Battered by contracting markets and frozen credit, many businesses were fighting for survival. The business environment was highly volatile characterized by frequent changes in markets and technologies. Organizations often faced palpable pressure to produce results in the face of constant uncertainty. Under these circumstances many employees find it highly difficult to cope with the increasing demands being placed on them. But in these turbulent times one cannot afford to remain obsolete. Recognizing employee obsolescence as an important cause behind setbacks, organizations are quick to weed out ineffective performers. Grow or go seems to be the motto of most organizations. At least to prevent the axe you are forced to keep pace with the changes taking place. There is only one best way to overcome stagnation and that is to continuously seek new knowledge. But here lies the twist. Knowledge is power only when you put it to effective use. So to avoid the pitfalls of obsolescence you must not only cultivate the habit of acquiring new knowledge but also learn to use it to reshape your life.

While most of the world grapples with a crippling financial crisis and a recession, optimism reigns in much of India as its economy continues to grow. India’s trillion-dollar economy remains a relative bright spot, some say, in part because the country’s bureaucracy and its protectionist policies have kept it insulated from the fallout of the global downturn. Though frightening, recession often show us opportunities we never dreamed of before. We are more creative and vibrant during chaos than during stability. Recession provide us a sobering reminder of what happens when innovation fails to drive economic growth. Recession jumpstarts the cerebral juices, enabling us to generate fresh ideas and to examine the same old story from a very different angle. In that sense recession is indeed a gift- A gift we shy away from perhaps, but nonetheless a true gift.

Lets have a PEST analysis of recession in India.

1)      Political impact of recession:

Despite the fact that India has become more and more vulnerable to financial problems and economic slowdowns in other countries, the congress-led government is claiming that it has shielded the subcontinent from a looming recession. That argument is bit farfetched, although a tad bit of credit has to go to Indian leaders – both political and business – for saving India from a bleak financial scenario.

Union Minister of Home affairs, P. Chidambaram said, “We have to take counter-measures and sometimes corrective measures to ensure high domestic demand. While the government is taking fiscal measures, the RBI is taking monetary measures.” This seems to have been the strategy for the Congress-led government to rescue the dwindling Indian economy. The government by itself may have little to do with warding of recession. Many analysts say that India is groomed for success in the global area, despite its weaknesses, largely because of an intrinsic entrepreneurial culture. Some of the advantages for India in the global market are that it has little exposure to exports – just 20% of India’s GDP deals with exports.

2)      Social impact of recession:

 Beyond the unemployment, foreclosures, and credit freezes, there is other, perhaps more long-term, societal impacts of the current economic recession. There is for many in this recession- a forced recognition of the fragility of the human economic condition.

Many families that had planned for their future, and that of their children, suddenly find that those dreams dashed to pieces against the rocks of an adjusted economic reality. There has been a societal readjustment in what the term normal economic conditions will be for the future. The frenzy of consumerist greed may well have gone, perhaps for the better, but not without severe pain in the short to medium term.

 

3)      Economic impact of recession:

 With some luck, India may be able to survive the economic crisis better than many other countries. Its banking system was not exposed to the toxic assets in the US. The government has come out with a substantial economic stimulus package. Recessionalso presents an opportunity for Indian services vendors to improve their market share, while forcing them to diversify and de-risk across sectors and geography.

Government has 2 plans: Fiscal Policy (by Govt) and Monetary policy (by RBI).

To come out of recession, India adopted

 

Changes In Fiscal Policy:

• Tax cuts for businesses or for individuals- then more money will be available for spending.
• More Spending by Govt to create jobs-then individual get salary and spend money
• Automatic fiscal policy; unemployment Insurance-provide some income to unemployed people to spend.

All these resulted in picking up demand in the market and hence it can recover.

Changes In Monetary Policy:

v  Reduce reserve ratio-then more money available for bank to give loans. Resulted in up demand in the market and hence it can recover.

 

4)      Technological impact of Recession:

Keeping track of the Information Technology revolution that has India in its grips, its profound visible and invisible effects on the Indian society, culture, ethos, the thinking of the citizen helped India to boldly face recession. Boom or recession- India always preferred R&D outsourcing destinations. India is still a red hot favorite when it comes to R&D outsourcing by corporations across the globe.

OPTIMISTIC SECTORS OF INDIA

As every business sector is affected by present global crisis and everybody is talking of slowdown in business, still in India there are few sectors which has grown in this adverse situation.

1. Food

No one can survive without basic food material like milk, vegetables and drinking water. Food processing companies will not be affected much and rather will earn profits by increasing the prices. These are the basic needs which we as a common man cannot produce by our self.

According to Ministry of Food Processing Industry (MFPI), the food processing industry in India was seeing growth even as the world was facing economic recession. According to the minister, the industry is presently growing at 14 per cent against six to seven per cent growth in 2003–04.The Indian food market is estimated at over US$ 182 billion and accounts for about two thirds of the total Indian retail market. Further, the retail food sector in India is likely to grow from around US$ 70 billion in 2008 to US$ 150 billion by 2025

2. Railway

As the aviation sector has been affect much badly and resulting in sharp rise in the air ticket rates the frequent travelers will prefer railways to cut the cost of travelling and this will result in increased traffic in railways and long queues at railway booking counters. The freight traffic of Indian Railways has continued to grow in the last few months, albeit at slow pace, indicating only marginal impact of the global recession on the Indian economy.

The railways registered 13.87 per cent growth in revenue to Rs 57,863.90 crore in the first nine months ended December 31, 2008. While total earnings from freight increased by 14.53 per cent at Rs 39,085.22 crore during the period, passenger revenue earnings were up 11.81 per cent at Rs 16,242.44 crore. The railways have enhanced freight revenue by increasing its axle loading, improving customer services and adopting an innovative pricing strategy.

3. PSU Banks

As seen in the private sector much of the job cuts due to global slowdown, it’s the public sector undertaking (PSU) banks which gained much confidence due to job safety and security. More and more people are likely to turn towards government institutions, particularly banks in the quest for safety and security.

A report “Opportunities in Indian Banking Sector”, by market research company, RNCOS, forecasts that the Indian banking sector will grow at a healthy compound annual growth rate (CAGR) of around 23.3 per cent till 2011.

 

 

4. Education

As education is considered as the basic necessity and in India it is seen as a long term investment by parents and with respect to the demand still there is a huge supply gap. The craze to study in foreign university among the Indian youth still alive which will prompt foreign education institute to target India provided vast young population willing to join. We will see more and more foreign educational institutions coming up in India in recent coming years.

Huge government as well as private investment is likely to flow into the Indian educational system. D E Shaw, a US$ 36 billion, global private equity firm is planning to invest around US$ 200 million in the Indian education sector.

5. Telecom

People will not stop to communicate with each other due to global crises rather it has been seen that it will increase much particularly with mobile communication. With cheap cell phones available in the Indian market and cheaper call rates, the sector has become the necessity and primary need of everyday life.

Telecom sector, according to industry estimates, year 2008 started with a subscriber base of 228 million and will likely to end with a subscriber base of 332 million – a full century. The telecom industry expects to add at least another 90 million subscribers in 2009 despite of recession. The Indian telecommunications industry is one of the fastest growing in the world and India is projected to become the second largest telecom market globally by 2010.

6. Health care

India in case of health care facilities still lacks the adequate supply. In health care sector also there is huge gap between demand and supply at all the levels of society. Still there are so many urban areas were you could hardly find any multi specialty hospital. And in case of metros the market sentiments itself created a need of psychological consultation.

Healthcare, which is a US$ 35 billion industry in India, is expected to reach over US$ 75 billion by 2012 and US$ 150 billion by 2017. The healthcare industry is interestingly poised as it strives to emerge as a global hub due to the distinct advantages it enjoys in clinical excellence and low costs.

7. Luxury products

The high and affluent class of society will not be affected much by this global crises even if their worth is reduced significantly. They will not change their lifestyle and will not stop spending on luxurious goods. So luxurious product market will not be affected and in fact to maintain the lifestyle those affluent will spend more for it. Luxury car makers are pouring in to woo the nouveau riche (Audi, BMW are the most recent entrants).

8. M&A & Marketing Consultants

As in the current business slow down survival will be the main focus, the marketing and management consultants will be called for to reduce the costs and to show the ways to survive and stay in market. Others may join hands to fight with this situation together will call for the Marketing & M&A consultants. In a booming market there are growth strategies and M&A opportunities to advise on. When businesses are cutting back, consultancies will be right there to help clients decide where to wield the axe.

According to Ministry of Commerce and Industry’s estimation, the current size of consulting industry in India is about Rs 10000 crores including exports and is expected to grow further at a CAGR of approximately 25 per cent in next few years.

9. Media and Entertainment

In current bad times, where people are losing jobs and getting enough time to watch TV, they will seek entertainment at home and hence advertising revenues will increase for the commercial channels. Also businesses like production of religious texts and religious materials, religious channels will do well. The TRP of religious channels will increase compare to the other entertaining/commercial channels.

According to a report published by the Federation of Indian Chambers of Commerce and Industry (FICCI), the Indian M&E industry is expected to grow at a compound annual growth rate (CAGR) of 18 per cent to reach US$ 23.81 billion by 2012. According to the PWC report, the television industry was worth US$ 5. 48 billion in 2007, recording a growth of 18 per cent over 2006. It is further likely to grow by 22 per cent over the next five years and be worth US$ 12. 34 billion by 2012.

India Maintains Sense of Optimism and Growth through:

1)      Team work- Acquire swarm intelligence to overcome recession:

 

Teamwork continues to be a critical component of today’s organizational culture. Teamwork during recession forces us to stand taller in the game called life -as “No one can whistle a symphony.  It takes a whole orchestra to play it”. But it’s a challenge to be a contributing member of a team – joining hands will not happen on its own, you have to work towards it by molding yourself accordingly and be willing to work together.

This begins with first understanding why the team really exists, what are the common goals, vision and purpose besides what is your own unique role and responsibilities. You have to be willing to go the distance, i.e. be prepared to help others as well as open to accepting help when needed. Teamwork calls for constant personal interaction and open communication as you readily share ideas, information and know-how. Again, team spirit is not about competition (me vs. others) but cooperation (me with others) as you willingly joining hands and combine efforts.

Team work among social insects is largely self-organized, coordinated mainly through interaction of individual colony members. They are able to solve difficult problems, such as choosing the shortest route to a food source, through the process of one ant simply following the trail left by another! The collective behavior is called Swarm intelligence. This is also a kind of knowledge management! The researchers have found that the social insects succeed because of three characteristics: (1) flexibility; (2) robustness (even when individuals fail, the group can still perform its tasks and (3) self-organization without any supervision.

2)      Use recession to Trigger Rejuvenation: Develop a Strategy to Revitalize its Company:

Recession – a Burning Platform

When times are good it is difficult to precipitate change in an organization, so you require a burning platform – a dramatic event – which forces your team to focus on transformational solutions which are not palatable when times are good.  It is these transformational changes that allow your company to survive and position it for future growth. 

3)      Leadership at all levels:

“The Great Leaders in times like these are the ones who can retain perspective and provide a steady hand so that their people can do the right things”. Leadership is a critical factor in deciding the degree of talent engagement in any organization, particularly in the case of team effort.  When approaching change in these recession days, don’t go searching for a change specialist. What you need are leaders with a strong plan for how the company is going to survive today and succeed in the future—leaders who can communicate the first few steps on the path forward and rally employees, customers, and partners to work together in making the tough decisions and taking the steps needed. Success will depend on leaders who are able to stabilize the company as they identify and exploit opportunities, find new market niches, create innovative new offerings, and restructure and reposition.

4)      Increased emphasis on Talent engagement:

At times of recession, talent acquisition and retention will remain a challenge. The fear that looms large for organizations in these turbulent times is that ‘talent’ may drift away from the organization. This could be a ‘mental drift’, wherein employees feel alienated or de-motivated. This ‘mental drift’ could later precipitate into a ‘physical drift’. Organizations must remember that any knee-jerk reaction now could be detrimental in the long run. Hence, the focus has to be on ensuring that the ‘mental drift’ of employees doesn’t happen when issues such as cost reduction and lay-offs are addressed.

The solution to such problems is through effective team work, one can develop Dual Strategies for Today’s Survival & Tomorrow’s Market Leadership and that demands strategic planning.  It requires high level of talent engagement which essentially represents an alignment between maximum job satisfaction and maximum job contribution. It may also be defined as ‘the degree to which talent is emotionally bonded To His/Her Organization And Is Passionate About His Or Her Work.’ .

India was successful in overpowering Recession because of its optimistic approach. Being in a good mood will raise your energy level, give power to your words, and boost your professional presence. Optimism can be learned. Here are five tips for developing optimistic habits to face Recession

• Build on your strengths.
• Radiate optimism.
• Speak highly of yourself, especially when talking to yourself.
• Surround yourself with builders, not detractors.
• Create magnificent obsessions

 

Individual commitment to a group effort – that is what makes a team work, a company work, a society work, a civilization work. “The fundamentals of our economy continue to be strong,” a statement by the Reserve Bank revealed, adding, “once the crisis is behind us, and calm and confidence are restored in the global markets, economic activity in India would recover sharply. But a period of painful adjustment is inevitable.” So the optimistic India proudly says: “Let’s not just survive—let’s thrive in times of recession”

About the Author

I am Arya B Raj, an MBA graduate from University of Kerala(institute of Management in Kerala)

I have presented the above paper in a seminar conduted by a B- school and i got second prize.

Regards

Arya B Raj

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