There's a reason for not having blogged for a long time. There simply wasn't an interesting topic to write :p Honestly, I had to literally dig for topics on which I could have a strong and clear feeling !
I have been following the Economic Crisis taking place in America, for quite some time now. The magnitude of the impact because of the crisis is un-doubtedly the worst ever since the dot-com burst couple of years back (I wasn't there during the Great Depression) !
Let me not get into the details on how the whole crisis started cuz I am sure everyone of us would have heard about it by now. What bothers me now, is whether India could be the next destination for a similar Crisis and the recent developments strongly suggest the possibility!
Let me explain why....
Since an year or so, there seems to be a new unseen Credit Card revolution in our country. Card companies have been hounding the earning-class, especially the youth, to take their Credit Cards for free of cost. There was a time when having a credit card was a status symbol, which only the rich and the elite could afford to. But now, you can find people just out of college piling up atleast 3-4 of these cards in their leather wallets ! Having a credit card has never been this easy and simple !
Buying is on an all-time high in our country. Its almost a disgrace if you don't visit your Mall every weekend and buy something new for yourself or your family. Spending has become part of our DNA. 10 years ago, a great amount of planning, saving and ofcourse a post-mortem was inevitable even if the tiniest of things were to find its place at our homes ! But now, thanks to the increase in salaries, an average middle-class guy doesn't really need to think too much if he sees a nice sleek LCD tv in his local electronics appliance shop.
Real Estate prices have sky-rocketted to unrealistic figures ! While some buy flats or independent homes to settle down, there are others, who would have already purchased a house, but still would want to buy another site or an apartment all cuz of investment sake ! All this leads to an increase in the cost of real estate whose actual value would have been much lower.
The Mall culture, Credit Cards, high-spending etc : All these had been flowing in the veins of an average American long before an average Indian picked them up. It doesnt require an economic professor to tell you that India is slowly marching on the path, once treaded by a "great" country called America, which is currently reeling under severe economic crisis !
The time has come for the Indian Government to have stringent regulations in place before our worst fears turn into reality in our country. The people also need to realise that they need to cut down on their spending on un-necessary goods/luxury items as there seems to be a scarcity of "hard-cash" everywhere. All your assets like flats/gold/stocks are loosing their value and therefore it has become all the more important to hold onto your cash like never before !
Remember, this is only a short-term but very important sacrifice we all need to make, if we want our economy to get back on its feet !
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10 comments:
"The people also need to realise that they need to cut down on their spending on un-necessary goods/luxury items as there seems to be a scarcity of "hard-cash" everywhere"
I can only hope that this becomes a reality. Sacrifice is not something that you'd normally associate with the Indian buyer.
ha ha ... whatever happened to those savings that our mums and grand-mums used to do where they used to regularly put money inside a kitchen container and hide it from the rest of the family so that they come in handy on a "rainy day" ! I think the present generation has just lost that kind of sensibility which is so simple yet effective...
Very nice write up.. Although, i beg to differ on 2 aspects. Conspicuous consumption is bad only on credit. Consumption within one's earnings is good and that is what stimulates the economy. So, do go to the mall, eat out, watch movies and buy stuff often. The value of money increases with the speed at which it changes hands. Also, macro economic conditions and financial markets tend to be cyclical. People tend to overshoot during an upswing and correct more than needed during a downturn. Such times of crisis present us with amazing opportunities. Equity markets are trading at a discount. Real estate prices are collapsing. Most volatile assets tend to be undervalued during such times. It is best to invest now than later. The common mistake that people make is they enter markets during a Bull Run and exit during a bear slide. It should be the other way round. There is a scarcity of liquidity and holding on to cash will only increase this intensity of this.
ಕಾಲಾಯ ತಸ್ಮೈ ನಮಃ..
ಒಂದು ಹಂತದಲ್ಲಿ ದೇಶದ ವಿವಿಧ ಭಾಷೆಗಳನ್ನಾಡುವವರೆಲ್ಲಾ (ಕನ್ನಡಿಗರನ್ನೂ ಸೇರಿಸಿ) ಪ್ರತ್ಯೇಕವಾಗಿ ಸಂಸ್ಕೃತದ ವಿರುದ್ಧ ಹೋರಾಟ ನಡೆಸಿದರು. ಅದೇ ಸಮಯದಲ್ಲಿ ಇಂಗ್ಲೀಷಿನ ಇಂಗ್ಲೀಷಿಗರ ವಿರದ್ಧವೂ ಹೋರಾಟ ನಡೆಯಿತು. ಹೋರಾಟಗಳು ಕೇವಲ ಭಾಷೆಯ ವಿರುದ್ಧವಾಗಿರಲಿಲ್ಲ. ಅವು ವ್ಯಕ್ತಿತ್ವದ ಮೇಲೆ ಮಾಡುವ ಪರಿಣಾಮದ ವಿರುದ್ಧವಾಗಿತ್ತು. ಆದರೆ ಅವೆಲ್ಲವೂ ಒಪ್ಪಿಗೆಯಾದರೂ ವಾಸ್ತವದಲ್ಲಿ ಅಸಾಧ್ಯವಾದುವು.
ಈಗ ನೀ ಹೇಳುವ ಈ "ಅಮೇರಿಕೀಕರಣ"ವನ್ನು ಜನ ಒಪ್ಪಿಕೊಂಡಿಯೂ ಒಪ್ಪಿಕೊಳ್ಳಲಾರದಂತಾಗಿದ್ದಾರೆ. (ಆಗಿದ್ದೇವೆ)
ಚೆಂದದ ಬರಹ ಕಣಪ್ಪಾ.. ಬರೀತಿರು ಹೀಗೇನೇ.
Agree with Arvind. If you observe exports into the US and EU for most Asian countries are declining due to decrease in demand and fall in commodity prices since last few months. This coupled with the fact that cash is being pulled out of the stock markets by foreign institution (stock market crashing drastically) would mean that domestic consumption is going to a huge part in the short-term economic growth. If people start fearing from spending and do not consume it will affect economy drastically. Financially India is relatively stable as loan to deposit ratio of most banks are quite low compared to US and UK and companies have healthier balance sheets - so they don't need to survive on lot of debt. But I think it will be very interesting to see how things turn out going ahead. This is a once in a lifetime moment :)
I presume thats Aravind from PESIT who is into stocks and investments (I know atleast 3 Aravinds from PESIT, so just making sure that I am talking to the right person ! :))
That was something I hadn't thought about frankly and its good you made that comment. However I have a small doubt. If people at this stage continue to spend money from their own pockets(not thru credit), thereby pumping in more liquidity into the markets, there wouldn't be enough money left in their hands when things(especially the basic items) are going to get dearer. We have seen the prices of basic items like food grains, soaps etc sour up , which means the common man either has to cut down on his spendings (now when has the money)and start saving more or try to live with the souring prices by making sacrifices on other items later..I am not sure if the prices of these items are gonna reduce especially the non-renewable ones like electricity etc. I know I am playing a safe card now, but atleast I can be sure that my future isnt tat unclear either..
Hey.. I am the *Aravind from PESIT who is into stocks and investments* [i]there wouldn't be enough money left in their hands[/i] There would be enough money in everyone's hands.. Money is just a value of goods and services. What does it mean when 1 KG of tomato costs Rs.30 and say your salary per month is Rs.30,000? It means that 1 kg of tomatoes are worth 0.1% of the services you provide to your employer. Money is just a measure of all goods and services that are available and are being sought out.. Now, if you buy clothes worth 5000 at Shoppers' stop, and a hundred other people do too, the owner of that place made a good cut. He goes to E-zone and buys a Samsung TV. He'll probably also spend else where and seek other goods/services. Sufficient number of such people will keep the cash registers ringing at Samsung and you get a fat paycheck. See where I'm getting at? The money that people spend goes around in circles. That faster that it does so, the better for the economy. It shows the total amount of goods and services available and sought in a market(which is also the GDP of a country). The prices going up are temporary and can mostly be attributed to crazy speculation on crude(our traders didn't do it ;)) Now that crude's been beaten down to $66, the rising prices will fall.. WPI was at 11.04% last Thursday. Isn't it interesting that although RBI is pumping money into the market, inflation is falling?
Ok point taken .. I still cant figure out why inflation shud rise if the RBI is pumping in money... :(
Inflation is the term used to describe the loss of real value of money. Hence, when money is losing it's value(ie. when there is rise in inflation), if you pump in more money, it loses its value further which pushes up inflation. This is the reason why the RBI had increased the CRR and the repo rates a few months ago, to curb inflation. Hope this helps
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