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Indian Companies During Global Recession: An Objectvie Prologue

Essay by   •  June 27, 2011  •  Case Study  •  1,899 Words (8 Pages)  •  1,907 Views

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INDIAN COMPANIES DURING GLOBAL RECESSION: AN OBJECTVIE PROLOGUE

Presented at:

The National Conference on

Business Potential of India in a

Global Recession Scenario

4th April, 2009, Saturday

Presented By:

Rashmi Shashikant Malapur,

FACULTY ASSOCIATE,

rashmimalapur@gmail.com

ph: 022- 404343446, 022- 40434343 or 09820470347

ICFAI BUSINESS SCHOOL,

HIRANANDANI KNOWLEDGE PARK,

OPP HIRANANDANI HOSPITAL,

OFF TECHNOLOGY STREET,

POWAI,

MUMBAI- 400 076

MAHARASHTRA,

INDIA

INDIAN COMPANIES DURING GLOBAL RECESSION: AN OBJECTVIE PROLOGUE

In the mad race of reaching the boom and sustaining it, world economies riding on the horse of capitalism have been thrown off the saddle in a rather rude way. The Indian economy has though not completely but has been moderately affected by this fall. The Government of India has policies which have safeguarded the interest of the people here by not excessively and artificially lowering the interest rates as by The Federal Reserve. The Marginal Propensity to Save MPS among Indians is high and it's a huge consumer base.

Indian companies should focus on innovation, as the big global players will cut on costs vehemently the Indian companies should take the opportunity to invest in innovation. As the recession and negative sentiments are replaced by positivity the Indian companies would have spent the time in innovating and would be able to hit at the opportunity then. They would be at power with the global bigwigs.

Creativity among employees need to be encouraged, and a company culture of innovation should be encouraged which takes into confidence the employees to perform in the crisis situation and encourage to channel their creativity to cut costs. At a time when survival is the focus for global players Indian companies which are not that badly affected should invest in the future, in innovation and these companies will take off as the recession ends.

RASHMI MALAPUR

RESEARCH ASSOCIATE, ICFAI BUSINESS SCHOOL, KNOWLEDGE PARK, HIRANANDANI GARDENS, POWAI, MUMBAI

rashmimalapur@gmail.com, ph: 022- 404343446, 022- 40434343 or 09820470347

"The current danger," Friedman wrote, way back in 1963, "is that India will stretch into centuries what took other countries only decades."

- Thomas Friedman

He that will not apply new remedies must expect new evils; for time is the greatest innovator.

- Francis Bacon

India has emerged as a challenge to the developed world, the East is rising and the world is seeing great reversals of all time. In the midst of the flux of economic crisis the world forgets the root of the crisis is a tussle between the Keynesian and Adam Smith's ideas. Keynes spoke about pump priming, investment of the government in public sector as a solution to the then Great Depression of 1930s. While Adam Smith spoke about the Invisible Hand which will guide the course of the economy. Control of the government or free hand seems to be an endless dispute of ideology and policy. The Capitalist society now finds refuge in the safe hands of the government intervention. The developed world might question the capitalist ideology but as a purport of Capitalism AYN RAND long back spoke about innovative minds that rescue mankind at all times. She spoke strongly about objectivism and objective thinking alone will guide the course of capitalism.

The ex-chairman of the Federal Reserve Mr. Alan Greenspan, influenced tremendously by Ayn Rand's ideology has humbled today and accepted that he had put too much faith in the self correcting power of the free economy. However Ayn Rand vehemently opposed government control over the economy.

Let us have a journey into Ayn Rand's philosophy that has so inspired and influenced Mr. Alan Greenspan. I quote Nathaniel Branden from the book "Capitalism: The Unknown Ideal" by Ayn Rand.

"As to depression and mass unemployment, they are not caused by the free market, but by government interferences into the economy".

What one often ignores about the propagators of the philosophy of free economy is, it is based on objectivism. Objective decision making by individuals and bankers will regulate the economy and money supply. But what we saw during the crisis was the result of interference of the Federal Reserve by lowering the interest rates persistently. The Federal Reserve regulates the credit availability in the US economy. Banks were lending to borrowers with low creditworthiness and engaged in unscrupulous and risky investments. In the battle of ideologies, what is often forgotten is 'common sense' that Y.V. Reddy, former Governor of RBI, mentioned when he spoke to Joseph Stiglitz, American economist and Nobel Laureate, when questioned by the latter about the method of managing the economy amidst the crisis. He mentioned to Mr. Stiglitz that instead of getting enticed by complicated theories he relied on simple 'common sense'. Mr. Stiglitz lately was quoted saying that if Y.V. Reddy would had been with The Federal Reserve the United States would not have been in such a mess.

Credit goes to the Indian economist to have relied less on theories and ideologies and more on their common sense. But India does not remain immune to the crisis that plagues the world today. The decoupling theory that believes that the developing economy will remain immune to the global economic environment has failed. India in the past years has globalized rapidly and integrated with the world through exports and imports. India's two-way trade (merchandize exports plus imports), as a proportion of GDP grew from 21.2 per cent in 1997-98, the year of the Asian crisis, to 34.7 per cent in 2007-'08.

"The ratio of total external transactions (gross

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