India is slowly feeling the effects of global slowdown. Till September, India as a country was appearing far insulated from turn of events in USA. But as the number of affected countries is increasing, India is also finding itself a victim of economic turmoil.
The exports are decreasing because of low demand. Indian housing industry has totally gone haywire because of liquidity crunch and inflammatory prices. The IIP data also turned out to be negative for the first time in 15 years. That indicated slowdown in manufacturing and industrial sectors.
India is definitely going through slowdown because of global phenomenon. However, it will be too early to term it recession in India. Indian companies have been severely affected because of economic events taking place in western countries. The first sufferer will be GDP growth rate. It will be very difficult for India to register more than 7 percent of growth rate. Apart from that, many Indian companies are heavily reliant on outsourcing deals from western economies. Profit margins of these companies are most likely to shrink given the prevailing situation.
Strengthening rupee is a major cause of concern for Indian exporters. Industries like textiles, IT, jewellery, leather segment, handicrafts are likely to be biggest losers in global mayhem. Commodities sectors including metals, aluminum etc is also likely to suffer losses. Indian Government has taken several steps to revive the economy. Two stimulus packages have already been announced with special incentives for housing, construction, textiles sectors. Government is also trying to boost exports through several measures.
There are several other positive indicators as well. Lowering inflation gives more room to RBI to play with rate cuts. It will also bring down food prices. Good monsoon in the year 2008 will result in better agricultural production. Country also has adequate liquidity at its disposal. Falling crude prices is proving to be of great help to national exchequer.
India is also an investment driven market so that is likely to help the cause as well. The domestic consumption story of India is robust, so overall, India will definitely be affected from global events but the severity of it will be largely limited. India will also be able to recover earlier than other countries.