Exports do not play as critical a role in India as they do in China. Which is why, China has been hit far harder by the meltdown than India. In fact, remittances from Indians living abroad are much more crucial for India.
India receives a huge quantum of remittances from Indians living and working in the Gulf region. And, the Gulf area has still not been impacted hugely by the recession. Therefore, one does not expect remittances into India to drop immediately from Gulf Indians.
While China is suffering from a fall in growth rates, the Indian growth curve is still to see a marked dip. Economists have to study and assess the Indian situation fully, one can say that India can not be entirely insulated from the meltdown.
Substantial stimulating packages from the government can fend off recession to quite an extent. Remittances from the Indian diaspora spread across the US, UK and Europe could slide to a point if unemployment in the West, which were hovering at 5% levels, rise to 7-8%. But, this could be balanced in a manner by the Gulf scene where Indians are relatively better off. Of course, there will always be some very rich Indians who will keep their remittances flow going.
Even stimulus packages, that government expenditure can’t solve the problem. People are finding difficulty to fund investments. Obviously, India has to rely on increased demand.
Dwelling on the American crisis, economists speaking to several senior bankers were amazed how senior bankers failed to understand “what they were doing”. How could they have faltered in assessing and re-estimating the value of their assets. They were inventing assets and making people pay for them.
One Economics Laureate favored a dose of financial regulation and said he would do away most derivatives except some futures.
The history of economics has traced a trend of fluctuation in growth rates and national incomes. When things begin to go bad, the perception of people makes it worse. Some feel the recession will be over by mid-2009. Naturally, everything is a little uncertain now. But, it may be misplaced view that globalisation has made the scene more severe. After all, the financial world has become international now. However, we can’t compare the present meltdown to the Great Depression. Governments are far more proactive this time round. The steps taken till now may not still be adequate.
India’s PHBs have better access to finance than global peers:
Privately held businesses (PHB) in India are most confident across the world and have better access to finance than their global peers, at a time when they are facing a “global lottery like situation” for survival.
Around 84 per cent of the Indian privately held businesses (PHBs) find their lenders to be more supportive and this is well above the global average of 69 per cent, global consultancy firm Grant Thornton said in its report.
Such companies are possibly benefiting from their banks’ improved support mechanisms or good customer relationship management, or a combination of both, even at a time when funding is so scarce.
If the economic downturn continues to spread, then such PHBs may well start revisiting their outlook and expectations.
The research compared expectations of PHBs about access to finance in 2009, against how supportive they feel their lenders are being in the current climate.
Whilst 61 per cent of PHBs globally expect finance to be either less or much less accessible in 2009, a surprising 69 per cent of them believe their lender is being supportive towards their business, despite such difficult times.
PHBs in India appear most confident, believing that they not only have better access to finance (in relation to PHBs in other countries), but their lenders are currently more supportive as well.
Only 22 per cent of PHBs in India expect finance to be less or much less available, while rest of them are confident that accessing finance should not pose serious problems in the current scenario.