What will this new year bring us? I think, a lot of gloom. Most of it will get created outside our boundaries but with a knock-on effect on us. Predictions abound about the gloom ahead, the only thing that varies is the intensity and longevity of the gloom. Indications are that most global markets and economies will slump, the big ones have started to cave in and the smaller ones obliged to do so after a lag. We are in that lag right now, spurt in domestic consumption might cushion the downfall but cave we will.
There are two ways in which govt and central banks control the macro economy. Central banks execute the monetary policy and manipulate the interest rates, money supply and currency exchange rates of the country while the Govt executes fiscal policies that deal with budgetary allocations and spending. Although monetary actions bring quick and obvious results in the economy, Central banks lose their teeth when interest rates reach rock bottom which is happening now in economies like US, EU and Japan. RBI still has some leverage with interest rates in India, which is a huge positive. Fiscal measures on the other hand follow the slow and steady route and if executed well typically bring results in a few years. We are well aware of the execution capabilities of our system in India and I remain doubtful of how effective increased spending on infra and other areas will be. Money gets allocated in the budget, a percentage of it comes out of the ministry, a percentage of that gets into the project, a percentage of that actually gets spent on the work which generates long-term employment etc. I will be watching the monsoon in 2009 quite keenly as a bad one will exacerbate the gloom further.
Global economies will continue to re-price asset values and risk in 2009. Stock markets will remain volatile with negative bias, Credit will likely remain crunched, capacity expansions and personal consumption will remain muted, governments will print more money to throw it at increasing problems which will in itself generate more problems in inflation and depreciating currency, all signs are evident now of impending tough time for industries, investors and consumers alike. All sectors, services and products, will see lesser spending from their customers. With top line impacts, focus on bottom line will increase manifold. Cost savings and operations will be in intense focus and every company will have some tipping point beyond which job and salary cuts, promotions and hiring freeze, productivity improvement measures would need to be implemented for its survival. Overall negativity from all sides will result in employee performance dips across the board and the proverbial rat race will morph into a rut race.
Most opinions do factor in an upswing in the next 2-6 quarters and the hope is that there is gloom but not doom.
What do you think this new year will bring for you?
There are two ways in which govt and central banks control the macro economy. Central banks execute the monetary policy and manipulate the interest rates, money supply and currency exchange rates of the country while the Govt executes fiscal policies that deal with budgetary allocations and spending. Although monetary actions bring quick and obvious results in the economy, Central banks lose their teeth when interest rates reach rock bottom which is happening now in economies like US, EU and Japan. RBI still has some leverage with interest rates in India, which is a huge positive. Fiscal measures on the other hand follow the slow and steady route and if executed well typically bring results in a few years. We are well aware of the execution capabilities of our system in India and I remain doubtful of how effective increased spending on infra and other areas will be. Money gets allocated in the budget, a percentage of it comes out of the ministry, a percentage of that gets into the project, a percentage of that actually gets spent on the work which generates long-term employment etc. I will be watching the monsoon in 2009 quite keenly as a bad one will exacerbate the gloom further.
Global economies will continue to re-price asset values and risk in 2009. Stock markets will remain volatile with negative bias, Credit will likely remain crunched, capacity expansions and personal consumption will remain muted, governments will print more money to throw it at increasing problems which will in itself generate more problems in inflation and depreciating currency, all signs are evident now of impending tough time for industries, investors and consumers alike. All sectors, services and products, will see lesser spending from their customers. With top line impacts, focus on bottom line will increase manifold. Cost savings and operations will be in intense focus and every company will have some tipping point beyond which job and salary cuts, promotions and hiring freeze, productivity improvement measures would need to be implemented for its survival. Overall negativity from all sides will result in employee performance dips across the board and the proverbial rat race will morph into a rut race.
Most opinions do factor in an upswing in the next 2-6 quarters and the hope is that there is gloom but not doom.
What do you think this new year will bring for you?
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