Slowdown…Its Effect on us…The way out…

There is absolutely no question about the fact that the slowdown is upon us. He following effects is eminent specific to our company: Retail Segment: The purchasing power of people has taken a hit because of the austerity fiscal measures taken up by the government. The decrease in subsidy in oil as well as reduction of LPG subsidy has taken its toll on the pockets of the common people. What this mean for the retail segment is that we have to be careful in terms of appraisal when we looking at the savings accounts of the client because they have lesser amount to spend in their hands. Challenges in terms of SME: 1) The Iron & Steel Sector has already taken a big hit due to the immense rise of the raw material like iron ore. The sensitive situation in the Europe region as well the global slowdown added with fluctuating dollar rates are causing external pressure on the iron ore prices. This has forced many big players in the market to downsize their capacity. Apart from that lot of smaller clients have been forced to shut down shop. This possesses a serious worry and caution needs to be taken. 2) The Textile & Hosiery sector is under worry as the FTA between India and Europe has not fallen through. This would mean charging of import duty on their material being exported to the region causing lowering of profits for the Indian Textile Industry. Good Sectors 1) Gems & Jewellery is a sector that has good prospects. With the rising prices of gold lot of emphasis has shifted for the investors from highly volatile stock market to ‘safe asset’ of gold. In Europe as well with the volatility investors are looking to park their funds in gold. 2) Apart from those other Sectors like Pharma, Food Products i.e. the ones that have inelastic demand will have good prospects. A Way Out I firmly believe that we are at the moment stuck in the viscous ‘whirlpool’ cycle the only way out of which is through immediate monetary policy affect from RBI. They should bring down the interest rates right away. I believe the effect on inflation at the moment is due to supply side underutilization rather than demand side. The rising cost of funds is putting the projects to back burner. This is causing pressure on the classical component of the demand curve forcing prices to rise which is causing for supply side cost push inflation. This inflation coupled with rising oil prices is putting pressure again on the demand side. Now the demand pull inflation is already under control so this move will directly cause an improvement in the Capital Component investment of GDP increasing the growth.