A.R. Rahman's Journey to the Oscars - International Indian

PUNDIT’S VIEWWhat’s in store for 2009?Que sera, sera or can we anticipate?‘You can anticipate what 2009 will be like for you and your business,by interpreting signals that are there for anyone to pick up today.by: Raj NairThere are people whowill be rueing the The signalsfact that they did notpredict the crises of are now clear that2008. They were mostprobably picking up the signals in the Government2007 but those were getting lost inthe noise or not being interpreted. will come upFor example when the Scottishbank, Northern Rock, ran aground with some seriousin May 2007, some people in thefinancial services industry realised packages inthat the sub-prime game wasover, but most people did not. The January -Februaryformer included Warren Buffettwho called sub-prime based 2009 to revive thederivatives, Weapons of MassFinancial Destruction. mother sectors ofEven as early as September‘07, it was clear that the total the economy.outstanding derivatives weretoo huge to handle - $485 down earlier given a build uptrillion ( eight times the global of excess capacity in OPECGDP! ) Unwinding that without countries and oil demand hada global financial crisis would risen only by 1.5% in the nextbe impossible. My warning on 12 months.Nov 21, 2007 that The Indian The argument of heightenedcapital market would collapse war risks clearly could notsoon was largely ignored. The explain it. Index Speculators hadoutstanding derivates swelled to stockpiled, via the futures market,$ 600 trillion on Dec 31, 2007. the equivalent of 1.1 billionThe rest is history.barrels of petroleum (eight timesOil prices firming up by July as much oil as the United States07 and the leap to $147 a year has added in 5 years).later, sounded counter intuitive Speculators had gonebecause oil prices were going beyond oil. From 2003 to 2008,‘investment in the index fundstied to commodities has grownby 20-fold, to $260 billion from$13 billion! The fact shouldhave sent strong signals of animminent price collapse foreverybody to pick up. It was notdifficult to anticipate in July 2008that the sinking global economicsituation would shrink thedemand for all commodities andsoon thereafter, the speculativebubble would burst.I had spoken about sub $100oil price on July 11, 2008 whenGoldman Sachs was looking at$200 per barrel. Surely the signalswere there for all to see andinterpret. But most people werehappy trying the game of baselessprediction or getting swayed byother people’s predictions.You can anticipate what 2009will be like for you and yourbusiness, by interpreting signalsthat are there for anyone to pickup today. Now, with volatilityas we are experiencing today,predicting is tough.Signals from the US, UK andEurope:With consumer-spendingdropping, banks going under,national deficits being reigned in,etc. there are certain things thatwe can anticipate in the WesternRaj Nair,Chairman, Avalon Consultingworld in 2009.••More job losses.Postponement or reductionin of high ticket/ discretionarypurchases.• Severe cut in marketingspending by companies.• A Bretton Woods-typeinitiative to save the globalfinancial system from collapse.Risk management policies willdominate discussions.• Credit & liquidity problemsdespite bail-outs.• Sectors like automotive,plastics, textiles, chemicals,travel and tourism, etc. slipping.• Sectors like healthcare, foodstaples, doing relatively better.• More people will resort toecommerce to fish for savings /discounts.• More business failure andconsolidation than in 2008.• Service industries suffering ingeneral.• Protectionism versus freetrade debate may swing a bittowards the former.• Obama knows his politics. Willattempt to create many new jobsin the US by offering incentives toinvest in job creating ventures andto plug loopholes in the tax regimethat put those who have offshorejobs on the same plane as thosewho keep jobs in the USth16YANNI V ERSARYA16• Obama knows his economics.Willing to negotiate rather than fightavoidable wars. Same goes for otherWestern countries.• The Dollar could weaken before end2009 because the ‘safe haven’ concept atnear zero returns will not make the USTreasury the best bet for investors. Someinvestments will seek more returns in India(if there is no war with Pakistan) and China.• Russia is richer, stronger than before despite the drop in oil prices.The Russians will continue to bully neighbours.• China’s exports will be impacted but has the capability to rebounddue to the size of the domestic market. Watch out for dumping inmarkets like India, ME and parts of SE Asia.One or more of these may impact you or your business?...What signals can we see now in India which are relevant to industryin 2009?The signals are now clear that the Government will come up withsome serious packages in January -February 2009 to revive the mothersectors of the economy, viz. Construction (housing and infrastructure),Automotive and Textiles, on which a large number of industries andservice businesses depend. Exporters can expect rationalisation oftaxes which hurt exports and also some incentives. While it is betterThe second half of 2009 will be the start ofan economic revival in the Indian economy.However, 2009 will not be good for all.late than never, the fate of FY 08-09 has been sealed by the unwisecredit squeeze–cum-interest rate hike in mid 2008 and the delay inundoing the damage. GDP for the year will be in the 6 range and not inthe 7s which was possible mid-year Things will be better in India thanin the rest of the world. That is mainly because there is an underlyingviability in the economy due to low cost structure, growing incomes,good agricultural output in this year and the banking system is notbroken as in the West. Thankfully, the global crisis happened in 2008and not in 2011, because Indian banks had not yet fully adopted the badhabits of the western banks. They still have a decent lending portfolioand manageable bad debts.• Consumer confidence is low and uncertainty prevails...restaurants, movie halls, big ticket purchases at malls are reportinga significant drop but consumer demand is not dead.Will need astrong trigger to revive ‘fee good’, like good corporate news. June09 quarter results published in July may turn the tide.92 The International IndianThe International Indian 93