Meltdown and Bailout were oft-used words in 2008. It was a year where global conglomerates felt the tremors of an economic turbulence when gloss and glamour were seen off the high profile world of investment banking; when a reality check forced the world to stop and re-examine its obsession with consumption.
India has not been isolated from the economic storms that have buffeted the globe. Our stock markets have come off their highs, money supply is tighter, interest rates have hardened and projects have slowed down. Yet, on reflection on the year that has gone by and on the year ahead enterprising Indian Inc. captains feel challenged and not helpless.
The survivors of this downturn will be the efficient companies, and they will emerge stronger from this experience. They will also be able to access manpower and material inputs at lower costs, and consequently be able to offer their clients better value and grow market shares. The biggest fallout of the current crisis will be a shift in the epicentre of the global economy. This is perhaps the turning point that will see the growth impulse and recovery shift from the Western world to China and India.
India is fortunate to be a reasonably cost-efficient economy with exports constituting only a small part of its GDP. With proper policy measures, we can continue to grow at acceptable levels based on domestic demand. This can be achieved through increased domestic spending.
In a period of uncertainty that is resulting in weak consumer demand, the government should step in as the “spender of last resort” and invest in areas that will create long term assets for the economy. This would include sectors such as infrastructure, water projects, education, power generation and distribution.
The government has already recognized this and has announced a stimulus package. It has also demonstrated that it is monitoring the economy very closely, and is coming out with periodical measures to lower interest rates and increase liquidity. It has shifted focus from inflation control and has pragmatically opted for growth to stimulate the economy.
It is imperative that the spending envisaged should be rolled out quickly to avoid a negative spiral from setting in. To achieve this, the government should expedite commencement of work on projects that have already been approved. This will not only spur industrial activity, but it will also inspire confidence.
Companies like L&T we have always taken a conservative and measured approach to business and have built up an organisation that is cost efficient and caters to diverse sectors of the economy. This provides them with the strength and resilience to ride out the storm that the world is presently going through.
It is a measure of the ability of their work force that even during tough times, L&T has maintained both its order book and its bottom line growth at targeted levels. This is not a stroke of good luck, but the result of several strategic decisions that the leadership has taken over the last few years. Their strategy is to remain cautious yet optimistic in approach to growing their businesses, and will continue to pursue sustainable growth opportunities.
One can look forward to opportunities in sectors like nuclear power and railways. As India entered into a landmark deal for civil nuclear co-operation with global players, L&T is positioned to become a major participant in India’s nuclear power program. L & T have been a long-term partner of the Indian government in the nuclear energy program, and hope to significantly increase their role as the sector gets higher focus.
The railways and mass transportation have always held potential for growth. The success of metro systems in Kolkata and Delhi illustrate the popularity of clean and efficient mass transportation. Fortunately, the Indian Railways have the funds to expand. New freight corridors, urban mass transportation systems like the monorail, and new factories for railway equipment are on the anvil.
Adoption of the public-private partnership model by the railways has opened new opportunities for growth.
In the wake of one of the worst terror attacks on our country, it is time for Indian industry to renew its commitment to achieving the status of a global economic power. We need work at a more equitable development model that will see India grow beyond the twelve major cities, create wider employment opportunities, and enable our people to take charge of their destinies. As citizens of this great nation, we need to rally together and do our duty by our country.