BANGALORE: The imminent economic slowdown that the world faces does not bear much resemblance to its 2008 predecessor, according to economists.
Stating that the Indian economy is not insulated from the global crisis as claimed by the government, S Subramaniam, Chief Financial Officer (CFO) of Titan Industries said that the two situations are very different from each other.
Reflecting upon the previous economic crisis, he said that unlike the last time, global oil prices had not crashed. Speaking at an interactive session on Forex Risk Management organised by the Bangalore Chamber of Commerce and Industry (BCIC), he said that even the Reserve Bank of India’s policy to stay out, until recently had also affected this trend.
Scams have prevented investors and foreign direct investments (FDI) from coming into the country. Adding to this, VK Sharma, RBI Executive Director, who spoke about the volatility of financial markets said that there are commonalities with the two economic crisis. “Specifically, the Rupee depreciated against the dollar by about 24 per cent between March 2008 and March 2009 (from `39.80 to `52.20) with the volatility doubling to about 12 per cent (as measured by annualised standard deviation of daily changes). And during the current crisis, the Rupee depreciated by almost 18% in less than six months between August 5 and December 15, 2011, with the volatility almost doubling from about 5 to 12 per cent,” he observed.
He also stated that the RBI has hiked policy rates 13 times, raising the effective policy rate from 3.25 to 8.5 per cent. Speaking about risk management, he said, “I would very strongly encourage business and industry to invariably hedge their actual risk exposures without exception as a base-casestrategy.”