India faces meltdown woes
|Our Correspondent||Nov 13, 2008|
As with other countries, India has been hit by the global meltdown, stock market crash and rumors of banks on the brink that have resulted in jobs cuts, loan defaults and other problems. But for a newly growing middle class used to a booming economy and unused to adversity, tragedies are growing.
The gravest instances are the number of self-inflicted casualties amongst the yesteryear-corporate-poster boys and their families, unable to take the shame and humiliation of being reduced to paupers. Recently a Los Angeles resident and product of the Indian Institute of Technology, ruined financially, shot dead his wife, three children and mother-in-law before taking his own life. The police recovered the body of 45-year old Karthik Rajaram at his plush Porter Ranch home, whose $1.2 million in a London-based venture fund was wiped out in the stock market collapse.
Nor is India alone, The Financial Times last week quoted Ban Ki-moon, the United Nations secretary-general, as saying he fears that people in emerging markets like India would be hurt most by the devastating financial turbulence unleashed in the US and Europe.
"The least developed countries, the poorest of the world's poor - children, older persons and others - stand to suffer most," he warned.
A torrent of unsettling stories is pouring out of India, of families in a culture where financial loss amounts to dishonor. A Mumbai-based family of four committed mass suicide after they lost their wealth in the share market as Indian blue chips plummeted. In Ahmedabad, a woman committed suicide after her husband suffered similar losses. In Delhi, a property agent killed his wife and daughter.
It isn’t only the noveaux riches. Akanksha, a housewife, reflected the general sentiment when she said in an interview: “Not only one reads and hears about men and women killing themselves under pressure, even the soaring prices of food and daily amenities, including vegetables, milk, and meat to soaps, detergents, and sundry articles are affecting us badly.”
Bangalore, the country’s high-tech center, appears to be India’s suicide capital, with a suicide rate of 35 per 100,000, most of them related to stress among a people unable to cope with the city’s fast pace and quick growth. Workers in the IT and outsourcing industries, facing extended working hours, increasing competition and insecurity as well as separation from family are particularly vulnerable. That is now being exacerbated as jobs disappear in both industries, lost to the global slowdown.
Last week, for instance, the Associated Chambers of Commerce and Industry of India warned that India Inc. may be forced to cut workforce by a huge 25 percent as companies struggle to sustain operations due to the global economic turmoil. Assocham said the layoffs would be in seven key industrial segments: steel, cement, IT-enabled services/BPO, financial and brokerage services, construction, real estate and aviation.
On November 4, Indian Prime Minister Manmohan Singh set up a high-level panel to monitor the impact of the global financial crisis on domestic industry. Singh said that the downturn was expected to be more ``severe and prolonged’’ than previously thought.
Indeed, economic meltdown has hit hard in India’s information technology (IT) capital, Bangalore and other places. Since the US sub-prime crisis and the housing bubble burst, exports to America, on which India’s software sector relies heavily, have dipped drastically since March when they rose only 24.6 percent after rising at a torrid 35 percent earlier. Uneasiness prevails among the 1.5 million employees of the thriving business process outsourcing (BPO) centers due to the fear of impending job cuts with a slowdown in US outsourcing.
Last month, Wipro Technologies, a top Indian major asked hundreds of its US employees to go on ‘no-pay leave’ after it lost two of the biggest customers, Lehman Brothers and Merrill Lynch.
Others too can be expected to feel the pinch. India is the world’s biggest receiver of inward remittances from some 25 million overseas Indians spread across 130 countries. According to the most recent World Bank data, the Indian diaspora sent back US$25.7 billion in 2006. Inward remittances have continued to rise as the rupee has risen against the US dollar. However, as the world slips into recession, overseas workers inevitably will not only lose jobs but have less money to send home.
Chinese exports to the US which were 22.5 percent of the country’s total basket have been hard hit, affecting dependent economies such as India’s, which supplies cotton bales to Chinese manufacturing units. This has only worsened the despair of the Indian cash crop farmers and aggravating the possibility of already-rising farmer suicides. It is believed that as many as 1,000 farmers commit suicide every month.
Meanwhile, retailers have reported a 40 percent year-on-year drop in sales even during the Hindu marriage and festival season, a time for heavy purchases, is underway.
Tourist operators have reported bulk cancellations by foreign groups.
The sting of the creeping crisis was felt in full when TV channels filmed scores of employees of Jet Airways, India’s largest private airline, protesting against termination of their services. Though they were reinstated later due to political intervention, the message rubbed into viewers that the financial recession was for real and could affect anybody negatively.
Indeed, it has become difficult to arrest the downward spiral. Toxic loans that sparked the Western credit crisis may be somewhat alien to the Indian soil, but the banks have become reluctant to lend money as earlier. New projects and expansion plans have been put on hold even as current ones have been slowed down or temporarily stopped.
New Delhi knows with Indian general elections around the corner, political parties are looking at maximum mileage. India’s main Hindu nationalist opposition Bharatiya Janata Party has called the economy in “shambles due to the wrong policies of the government”, and squarely blamed the incumbent Manmohan-led coalition government for faulty decisions.
For all the talk of downturn, no one is actually expecting India's economy to shrink.
Few economists forecast the country's growth to be under 7 percent this year, a figure that most Western states cannot match; but this is still far away from the 10 percent growth that the Indian economy and its formerly confident executives were expected to clock.
Priyanka Bhardwaj is a journalist based in New Delhi. She can be reached at firstname.lastname@example.org