Monday, February 16, 2009


The 2009 is going to be a difficult year, despite optimism from Government of India. All indication points out to a tough time. Of course, it is true that tough time does not last forever but tough people do survive always. This is the time for survival. Almost all the developed countries are reeling under crisis. America is going through a most challenging time. The President Obama has convinced his congress for approval of stimulus package yet the very foundation of capitalism is under pressure. We would not be surprised if within ten years the condition of capitalism takes the route of Russian Socialism. Unemployment situation of America is mounting up. The growth of GDP has turned negative. Lots of educated persons have become jobless. The president is publicly criticizing corporate Houses for payments of fat Bonus to senior employees when large numbers of people are in distress. The condition of Europe is even worse. The expert opinion predicted that some European nations may experience the condition of poverty after long years. With such a condition of developed countries, export from India is going to be badly affected. Unemployment and job loss would be inevitable in our country. What is to be done now?

In India, of course, the conditions are not so depressing. Yet the global economic turmoil will affect Indian citizens too. There would be no bank failures, a few industries might close down. Unemployment will rise; export sector would no longer be a money spinner. Indian industry shall have to depend on the internal market. Since domestic market is large it would support those Industries which produce commodities of mass consumption. Investment would provide low return for another few years. The economic growth would fall below 7%. At this moment most pressing need for middle class would be to conserve money. How to do that?

It would be foolish to take out invested money for that would mean definite loss of wealth. A day would come when market would jump on its feet and people who have patience would reap the benefit. This is the time to conserve money by minimizing avoidable expenses. This is the time for middle class to be prepared for difficult time for another three years by becoming frugal in their habits. Don’t buy expensive Cars, unless it is most essential, don’t take luxurious trip for sightseeing. Check the habit of eating out and throwing lavish wedding parties to show off. Do everything with moderation. You would need money to keep your body , soul and emotion together. Do we have to stop investing?

Yes, for the time being keep away from bulk investing in equity. Those who have continuous flow of money like that of Doctors, advocate, creative people and self employed need to conserve money in FD of good bank and also in Arbitrage fund. For taking IT (80 C) benefits invest in PPF, Bank Fixed deposit and senior citizen scheme. An investment in good ELSS fund could be made through SIP only by younger investors. No lump sum investment should be invested in equity. If you must invest then do it through SIP. Buy Nifty & Gold ETF. You would need money for food, children’s education, health; payments of property tax or rent and to buy cloth etc. (avoid buying unnecessary expensive garments and shoes). During the period of depressing economic condition the best vocation remain connected with Health & food industry. Most of the time food & health product defy down turn. Perhaps all of us remember that Lee Iacocca’s father advised his son to join butchers trade when he lost his job as that was depression neutral area.
The effect of depression would penetrate our country suddenly. This is the time to forewarn middle class to conserve resources. Some time they behave like an Ostrich. In fact Indian middle class are exceptionally brilliant but most of the time they remain engrossed in day dreaming. Once they are awake they generate tremendous ability to protect themselves from any onslaught. Many people asked when the situation would improve ? It is difficult to predict. However, according to a proverb tough time doesn’t last forever, but tough people do. Let us hope 2012 would be the year of bright sunshine.



Pritam Dewan said...

I am no economist nor any expert to divulge great theories but I have a gauge meter built in which propounds me that we could be in a very bad state for this year through out. I guess bad then any aspiring middle class caught between living life of capitalist and thoughts of socialist.Well though I too fall in this category.Worst fear would be for a country like ours where political drama takes bigger picture than immediate problems. With the poor promises of Interim Budget (Report Card) I can just pray we get a good govt in center who can at least keep our economy afloat in this difficult time.
Coming back to equity investment choice of investing and not investing are 2 extreme measures. One cannot predict where to invest best but an investment in some form will be rewarded at best between 2012-2015. But it surprises that the cycles of upturn and downturn is turning shorter and shorter every decade and hence forth.This is source of greater confrontation at international level where the order and rule of civilization can be hurt or broken.
As for India we will source the world with bigger opportunities with less control of repeating mistakes.All I hope we will march to 2020 vision of a super power but can we sustain with the population at our back wards and requirements to feed the nation looks bigger!

Economy is hurting humanity!

Baroowah's Brave Blog said...

Dear Pritam,
Wanderfull anylysis. I donot care whether you are professional economist or not. but you are writing to much common sense.The best sense in human is the Common sense which rare in modern days. You have rare gift. Culture it well and you would be winner.

I am sure our country would come back again on top. But as I have analyzed that our zealous nature and one up man ship and arrogance for exploitation will not allow us to be great nation.
We will survive no doubt. India is fertile land and people are good at agriculture. Have we heard of a famine, except briefly in Corissa, since 142. I don't see famine is a possibility in India anymore in large scale.
But this is the time conserve resources.
warm regards