Issue3- October 29,2008
It’s ironic, but true—the slowdown is making a fast impact! A four-letter word continues to rule the roost. First it was “hike” now it is “cuts”. Job cuts, production cuts, fare cuts, growth estimate cuts, budget cuts, interest rate cuts have grabbed the headlines in India over the last week. Ashok Leyland cut off the number of working days, while Larsen & Toubro is cutting 50% of its workforce. Cement manufacturers have cut capacity utilisation to about 85%. The only way to get an edge over competition is efficiency through appropriate cuts. This is the new definition of cutting edge
Yet interestingly, India’s inflation continues to rise. At close to 11%, it’s making life difficult for the government. India’s weak and volatile currency would need to stabilize and gain strength to bring back foreign investors.
India’s central bank is working double time. Even as it cuts the prime lending rate, India’s private banks that are starved of liquidity are not passing on the benefit to the consumers. They claim the credit growth is still high and they are facing a cash crunch of sorts.
The Indian prime minister has appealed to the industry not to cut jobs. India’s infrastructure companies, which are facing shrinking order books, are banking on the Government to start spending before the general elections in April 2009. Increased expenditure could offset the reduction in overseas orders as well.
A recent IMF report states that developed countries will see a negative growth of -0.3% while developing countries slated to grow at 8% will grow at 5%, for the first time in almost 7 decades. Sometimes it pays to be a laggard!