Inflation and recession

Country’s inflation has fallen down from 11.44 to 11.07 for the week ended 11^th October. But if you compare the inflation rate in the beginning of the financial year it was lees than 5%.   

There is a substantial reduction the commodity prices which are unimagined. You may note the stock of the crops and the food grains also expected to see a reduction. This would lead reduction definitely below 10% if not to a level of 5.

The finance ministry was very open to consider the reduction of fuel prices if the price fall below to a level of 67.Off course the much expected and one of the major actions pending from government side is the fuel price cut. Which we may hope expected to happen any time.

As because viewing the current situation Government was much sympathetic and very keen in looking at the aviation Industry and given an bailout option for paying the fuel outstanding with the due consideration extending the credit terms.to avoid job loss(lay off) happening to India at a mass level.

Even left parties may oppose for the governments decision for supporting the corporate's like Jetand Kingfisher .But on the other face of it , it is the survival of an Industry as a whole.If the Government doesn't understand their position .At some point of time even Government may loose money also.(assuming that  if the Industry dies )

Though the kind of Job cuts may be good for the survival of the Industry but the kind of way it has been done was forced Government to intervene. Also in one of the meeting  minister has curtailed the top official of Air-India proposed for Job rationalization.He has been censured by the minister.Also the Indian economy and the Industry is not as bad for such Lay offs.

But all the IT majors have shown a positive results for Q2.Majors like Infosys commented that the environmental factors is one of the major factor but then they have been maintaining with the pace of additional headcount projected which is around 25000 employees.

Some of the experts feel that the impact t is not to the level of western economy. If such mass lay offs are set as precedent then the other Industries may start doing that only for their profitability in such a mass level in terms of  ten thousands(10,000).Then it would be a real recession.

Further, the stock market has not responded to the counter measures taken by the Government to improve the liquidity by the way of CRR (250 basis points) and Repo rate cut by 100 basis points. It would definitely start reap its benefits. And an average middle class investor can think of buying a house or an Automobile. The shift of wait and watch mode to a buy decision. There would definitely a time lag to realize the impact as it is taking time for the Global economic stability.

Also one more announcement from the Government side to increase the ECB and set a limit of 500$(million).Also the debt redemption pay out by the government also expected around 90$billion.This decision of the government may balance the forex reserve and balance the dollar rates against rupee.

Looking at the current trends though the slow down is imminent but the real impact of the slow down would be witnessed only while passing through the phase of it.

The first Sign of recession:

Sad news started coming from the Aviation Industry. Which is throwing  a clear signal of start of a recession for the Indian Economy.So far this kind of news have never took up so seriously. But this news has a significant impact and a bad Oman and the effect can cascade for the other Industries as well.

There are around 1900 jet Cabin crew and some pilots include in the list. The decision of sacking the employees looks so rude and tough If we think about the employees point of view. This action could be triggered and given Confidence to the Jet management because of the operational alliance they had with King Fisher airlines.

The top management spoke’s man Datta has told that the decision is inevitable and to safeguard the interest of the remaining employees. One way that is true.  

Viewing this issue beyond the employees sentiments. There are reasons to justify this decision. If we digg back past and see some of the old economy companies in the steel industry .When the industry was in the down turn the company has accumulated with severe losses and  some companies could not find a way to revive and only some of the big player have survived. Already the airline Industry has started bleeding. The low cost carrier model wont going to work .As it is difficult to maintain the cost .There is no other way of to over come this climate as the Financial Giants like Lehman and BSMA are falling.

The decision is ruthless but correct decision for the survival of the Industry. But the concern is the same effect will cascade to the hospitality Industry also. Sequentially start feel the heat in the IT and BPO segments also.

I remember sometimes back NarayanaMurthy has mentioned about the importance of saving money to the IT professionals. I think it is not late atleast the professional should caution and save enough Cash reserve in their bank account.

At times of recession it has always been proved that Cash and Gold are the saviors of those tough situations.   

 

Mike

Post :Dt 16/10/2008

 

Naresh Goyal decide to reinstate 1900 employees Back

Naresh Goyal decides to reinstate the Jet employees back mentioning that he is taking the decision based on his conscience and not on the pressure from inside or outside the management.He is treating the employees as his members of family and took a decision.

There is a slight controversy the Unioin minsiter says after he spoke to Naresh Goyal he re considererd this decision

The Jet employees started agitating against the decision of retrenchment.This agitatated employees should not turn against him personally to follow the Delhi example happened in the past.

The other way to think off  this issue is  crisis is a crisis .In this kind of situation building a confidence and trust to the employees should be more important.Like Infosys did it in dot com bubble.The fact is country like India is not prepared to accept such ruthless decisions.