The one big word staring at us in recent weeks is the ‘S-word’: Slowdown! A word we thought was banished from our economic lexicon for a while, as we rode the tiger semantic of being one of the world’s fastest growing economies. Ahead of China even.But none of us can run away from reality. The economy of India is certainly showing clear signs of a slowdown. A slowdown that looks like a medium-term issue for now, but one never knows.
Let’s look at reality for a start. The last quarter’s GDP growth rate has been announced to be 5%. Now that’s bad for sure. As numbers get revised and re-revised, we do not want that Plimsoll line of 5 to go down anywhere below that mark.
The signs were there around for a while for sure. The real-estate industry in India seemed to be the one that blew the bugle of a slowdown first. Sales were just not happening and prices commanded for properties in construction were touching the bathos. Everyone called this a temporary setback. Many blamed it on the cash-led economy of the real-estate industry, and laid the blame at the doorstep of demonetisation even, something which literally broke the backbone of real-estate.And then, there were murmurs from retailers that off-takes of consumer goods were slow. Urban retailers kept complaining that items of frivolous consumption were not moving off the shelves at the pace they
were expected to. And this time round, the trade blamed GST and its implementation for it.
And then, came the murmurs from rural markets. They were quite insulated from the global order in many ways (showing frenetic growth rates for the FMCG category in the face of the worst recessions in overseas markets), started complaining of poor off-take. This time we blamed the lack of jobs for rural youth, and adequate price-stabilisation means for crops in the rural milieu. And we blamed the monsoons as well, for sure.
The blame game done with, as of now, the murmur is now a loud shout. Off-takes across categories have taken a hit. There is a clamour for more jobs, and worse still, there is a threat that existing jobs may want to vanish. The ‘S-word’ is now threatening to look like a ‘R-word’ in the near future. Recession is a word that is trending on twitter for sure, and the hashtag #RecessionIsComing is the mindset affecting global businesses all across.
Even as we sit back and read this, recession in the US seems a reality that one cannot avoid. And when the US sneezes, all of us will sneeze. We may not catch the flu, but sneeze we will. The world is that much more flatter than before. Now, is that the real problem? It just might be, but it’s a bit too late to hold the horses back on that. They have bolted long ago.
The reality is therefore a package sum of both the truth and the perception. The truth is that the basic metrics of growth are just not right. The reality is also the fact that the Centre, with its key economic-intelligence troika of PM Narendra Modi, FM Nirmala Sitharaman and Commerce Minister Piyush Goyal, is hard at work. After the Budget 2019, there has been an unwinding of sorts. Many policies have been re-iterated, altered and announced. The positive action on FDI is certainly one of them. The merger of banks, which I call “Bank Cannibalism”, is another. More measures seem to be around. There is no doubt that the government has the issue at center-point, and will attempt to rectify it.
The perception about the slowdown is equally important. In a slowdown environment, sadly, the perception of the slowdown is more important than the truth. In a typical slowdown-economy, everyone takes a back step. Irrational back steps even.I will not want to replace my seven-year-old car.Let me drive it around for another two years. Let me not lock in my money in goods and services I can postpone. Let me keep my cash liquid. Let me just focus on the essentials.
I will therefore not buy the car. Not buy the washing machine. Not invest in financial instruments that depend on markets controlled by the bulls and the bears. Even the Mutual Fund is not ‘sahi’ for me, despite all that the AMFI told me through high-decibel advertising over the years.
I might trade down my brands that look too expensive. And I might even start using less of the toothpaste on my toothbrush in the morning, and less of shaving-cream even. Can I make that expensive can of Gillette last for two months than one?
The perception of the ‘S-word’ is what is more threatening than the truth. A perception that is pessimistic has the potential of dragging the ‘S-word’ to be the dreaded recession word even.
So if you ask me what’s around as a mood, it is a mood of “Cautious Pessimism”. Everyone has one around. The manufacturer delaying payments and procurement of inventory is just this. The consumer postponing the purchases is also just this. For now.
This mood of cautious pessimism is going to create a spiral. Consumers will postpone buying and use less of product. Manufacturers will see the trend and produce less. Profits will fall and the circulation of money will slow down. Jobs will be shed.
While the government and manufacturers will see this mood of “Cautious Pessimism” to be the big enemy, consumers and citizens will see this to be that umbrella of attitude that protects them during the stormy and rainy days. To each our own then, as we go through this one as well. Even this shall pass.
Harish Bijoor
Brand Guru & Founder, Harish Bijoor Consults Inc.
Email: harishbijoor@gmail.com