The battery that keeps the Indian economy alive and why all batteries get drained eventually!

That is an economic depression - Cartoon copyright with creator. 

These days, there is a sense of sad helplessness in the air at the office. And this feeling of despair is not without any reason. There could be a depression coming.

In depressions, the accumulation of excessive debt and increasing speculation go hand in hand, one feeding off the other, until the speculative bubble goes BOOM! The bust then quickly leads to a rapid fall in asset prices (yes, your real estate investments also) and then ultimately spreads to general product prices and then to the salaries.

That is not all. Read on. Running short of cash and not receiving dues (other businesses are facing the same, remember?), businesses then cut costs. Firing/ laying off occurs first in smaller numbers and then, they take out tenders for cheap printing presses for printing pink slips! As revenues continue to drop and debt and costs rise, the most exposed businesses begin to default on their already borrowed loans to banks, causing a further round of bank losses and NPAs. Banks in turn tighten credit further. You get the drift buddy? Now look around and you will see a lot of that happening. 

Also, recessions and then depressions are always global phenomena. The US, Japan and most of Europe are going through some very hard times. Sadly, India's economy does not live in isolation to these global facts. You can hold up the shield for a while, but then, you cannot hold it up forever. We guess the so called Indian force field is now running out of battery. The battery of the famous Indian internal consumption. 

If you do a little reading, you may stumble upon this from Forbes. "The Present World recession is five years old and is on course to become the longest in history." Gulp! Now that is getting harder to swallow.

Let us look for some signs; 

Each morning as the newspaper boy comes in, he brings you hundreds of education related advertisements in all the dailies put together. Huge college campuses in the middle of nowhere seem to come up everywhere. Each year, hundreds of thousands of young Indians pass out from various colleges and come into the job market, demanding jobs. However, common sense (and your mother, if you ask her) will tell you that instead of hiring, India Inc. is mostly laying off people these days, to cut costs and live through this dark phase. With India's industry growth rate under 2% for this financial year and a 11% (Dec 2011 to Dec 2012) average inflation rate, creating new jobs is not even on the priority list. Survival is. 

"We have been given new connection targets man. I need to get 700 new mobile connections from my zone within this much time or I don't think I have a job anymore", said a telecom company employee last evening, sipping his tea. That 700 will become 1000 the next quarter as companies and their shareholders seek growth. Growth? Who the F*** is going to buy new mobile phone numbers from the same area month after month? Is the average Indian expected to consume even long term services like phone connections once every quarter? Are we expecting a damn battery built for a car to power a cruise liner? Maybe we are. And maybe, that is why the very battery that kept the Indian economy alive and afloat for the last 5 years is at it's fag end.

"Brother, some very crappy times are coming ahead. This is just the tip of the iceberg. Trust me", warned Ashok Singhal, in the middle of a conversation with us, months ago. Ashok is an industrialist with presence in multiple core industries in North East India. We think, we are now on the high seas of the time Ashok was talking about. 

Quick Self Analysis Task:

Ask your self this. "Is the sales or retention target given to me by company achievable and realistic?" Now hold on to that answer till the end of this article.

***

More from Forbes. "Nobody really knows how to get things humming again, because nobody knows what it is that makes them hum in the first place. John Maynard Keynes came closest to it with his vague phrase 'animal spirits'. A capitalist economy hums when leading businessmen are bubbling with animal spirits and are prepared to sink their money into risky ventures. Sadly, the world today is a place in which animal spirits are frowned upon." The Indian businessman and entrepreneur washed himself of any such spirit post 2008. All of them now report back to their dads and wives each night and any risky step would mean no food. Hope you get the picture, dear reader.

Adding to this f***ed up atmosphere and the draining battery is the current low-quality crop of our political leaders. When you try and imagine what India is going to be like post the next general elections, the picture becomes hazy and distorted. This is further eating away into happy consumer sentiments.

Now ask yourself the second question. "Is the internal consumption story of India capable of powering growth forever?" Now match this answer to the one you are holding on to from the quick task above and you should be getting a picture in your head. A sad and uncertain picture, that is.

They say the period before the 2014 general elections is going be full of euphoria. It will bring a kind of kick that will help us forget all our woes and make this article redundant. At Pillars, we are calling that the quick recharge phase. It would recharge the great Indian battery again and erase this country's infamous short term memory (Hey! What happened to the Delhi rapists?). But mark our words that if it stops at being a mere quick recharge this time, we are in for some very big sh** in the future. 

Sadly, they don't make this kind of battery anywhere. Even Leepu and Bernie from their London Chop Shop would agree.

Godspeed!

Related Articles:

1. The changing face of Indian realty. The good times are certainly coming

2. The Ghost demand for retail space in India

3. We do not wish to buy any property in the coming two years' time- The common Indian