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http://www.rediff.com/business/slide-show/slide-show-1-column-indias-...
Indian companies, bankers and experts have all given up hope of an economic recovery, rues Akash Prakash.
Industrialists have absolutely no interest in making any fresh investments, and have very little confidence that projects that are
currently stuck will start moving. Capital goods providers also seem to see little sign of the public sector investment step-up that the finance minister talks about. Domestic order books remain subdued. Even consumption seems vulnerable; most of the participants agreed that consumption beyond a point couldnt keep growing independent of the broader economy. Everyone is convinced that this growth slowdown is largely self-inflicted. We have lost the plot and cannot blame our travails on external factors. The business class has given up the hope that the country would ever get back to the high growth rates achieved in 2003-07. Most have made business plans assuming that growth will be at best six per cent over the coming few years. Cost cutting and asset rationalisation, not growth, are at the top of their agenda. While there has been some improvement in competitiveness among many sectors, such as engineering and auto components, a large number of companies still complained, surprisingly, about the rupee, which is now at 60. There was no sense of a broad-based export surge around the corner. The complaint that India was uncompetitive in terms of
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7/31/2013 7:53 AM
http://www.rediff.com/business/slide-show/slide-show-1-column-indias-...
infrastructure, land, labour (adjusted for productivity) and capital remains. If this is true, how will any new manufacturing investment happen? Click on NEXT for more...
Bankers spoke of balance sheet stress on an unprecedented scale, and of the worsening credit quality. Unhedged foreign
exchange exposures are a real issue, and most wonder how credit growth will cross 10 per cent. Those who rely on the wholesale markets are even more depressed since, as a result of recent measures by the RBI, both the cost of funds and access have deteriorated. If these measures continue beyond two or three months, both the profitability and growth of their business models will be impaired. The decimation in the stock prices of public sector banks is also a worry. How will they recapitalise at these valuations?
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7/31/2013 7:53 AM
http://www.rediff.com/business/slide-show/slide-show-1-column-indias-...
What does it signal about the state of an economy that almost 70 per cent of its banking system is trading at below book? Are banks share prices a lead indicator of a systemic problem? There appears to be a total breakdown in trust and co-operation in the system. We seem to be back to the mid-1970s. Businessmen are once again seen only as rent seekers who are trying to monopolise national resources. The bureaucracy seems to be making sure that no one or no industry is earning more than it should. Trying to promote or grow an industry no longer seems the primary focus of most regulators. The political discourse in the country has lurched very much to the left, with capitalism in retreat. Click on NEXT for more...
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