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.

Financial Tremors

After the fall of the Lehman bother’s and Merrill Lynch selling to Bank of America.Today’s global economic scenario had made the people panic and to worry about their finances. There are very many reasons to believe that. Why this announcements are happening all of a sudden without giving any clue to any one.

Traditionally if you look into some of the steel industries in India which has faced some rough weather in late nineties early2000 this decade .It was known to every one that this Industry is in trouble or so and so company is in trouble. But no such lay off happened to a surprise.

Now the momemntum of this cascading effect of the economic turbulence in the US and global economy had a very great impact on Indian economy as well.Todays times of India expected lay off from India would be 25000 Jobs Excluding the job loss from the people who are working with Lehman brother ie 2500 employees’ announcing job cut of 25000 as a consolidation phase with EDS. As it would be a very serious hit for the BFSI segment. We dont know where the next bad news going to be.

The question unanswered here is working with company like Lehman brothers may be dream for an IIM graduate but these dreams are all burnt out all of sudden…How this happening all of sudden? Yesterday colleague of mine confirmed that 5000 employees have moved out from Lehman brother’s office at UK..

The exponential growth which had happened with the IT industry had projected a big expectation with the Indian youth not for looking for other option based on the salary and the lifestyle of the IT employees had lured many to this Industry. India has an out flow of around 100,000 engineering graduates every year .Now those dreams are???

Already companies have tightened their recruitment process .Out of 1000 only 4 people are getting selected in some of the job fairs organized. Though the respective governments are injecting some 240$billion in their economies.. Let we wait and see how this effect is going to be handled.

A revival will be expected after the US elections. Let we keep the fingers crossed and watch.