The current monsoon, while bountiful so far in temporal and spatial distribution, has also precipitated a deluge of seemingly bad news.
The inflation rate is poised to breach the 12 per cent mark perhaps by the end of the current week and may be the worst in more than 15 years. Interest rates have been creeping up almost on a weekly basis for almost six months and with that, the outlook for corporate earnings has been getting dimmer in tandem. Stock market indices are at their lowest in the past 15 months, and may soon touch levels not seen since 2005, wiping off as much as $900 billion of the paper wealth of the investors from its peak.
The rupee is once again back to getting weaker by the week, as if to ridicule all those who were making an absurdly vociferous din against its relative strength just three months ago.
The government may still believe that India can achieve a growth rate of about 8 per cent in the current fiscal. However, I suspect that a majority will probably accept a 7 per cent figure for FY08 and even a 6 per cent level in the next fiscal with some relief.
Ranbaxy, till recently touted as one of few glowing examples of the vision and prowess of Indian entrepreneurs/globalised managers, threw in the towel, notwithstanding the spin of virtuosity and sagacity some sections of the Indian financial media have attempted to give. Finally, this week may usher in a formal beginning of the end of the current UPA dispensation and the countdown to the next general election.
Is this the end of the dream run many in the country have been a part of (or at least witness to) in the past five years or 15? Is there any silver lining at all at the edge of the dark clouds that seem to have taken off a lot of sheen from what till a few months ago was a resurgent India?
Though ironical it may sound to many, I believe that almost all of this apparently bad news is good for India and may be good for a majority of Indians in the medium term.
The euthanasia of the current UPA government is probably the most humane end to the misery of its much-weakened leader and the comatose Cabinet he heads.
In more than four years of existence, the incumbent executive leadership has given short shrift to just about every policy reform sorely needed, has turned a blind eye to the decimation of many of the critical social and physical infrastructural imperatives such as education, healthcare, highways, power, law and order, and cultural freedom, and overtly or covertly accepted unprecedented levels of corruption at the highest echelons at the Centre and the states as a price to pay for buying a few more months of survival each time for the leading constituent of the UPA to enable it to maintain the facade of it being India's ruling party.
An early general election at least gives hope and the possibility of a more constructive and effective coalition.
A slowdown in the GDP growth rate may not only act as a dampener to the runaway inflation but also force the government and the private businesses to give further thought and effort to become more innovative, proactive, and productive.
We did it against all odds in the early 90s and then did it again after the slowdown in 2001. There is no reason why the impending slowdown cannot be utilised by the leadership in the government and the private sector to take bold and sometimes hard decisions.
In the past few years, many critical components of businesses have fallen out of equilibrium. The most notable are relating to the cost of doing business itself, including executive compensation, real estate (commercial and residential) and the overall cost of occupancy, and travel (hotels in particular).
I am sure not too many will shed tears of grief watching the realty and the hotel stocks' meltdown. My professional colleagues may be more upset at the prospect of single-digit increments (when given) and having to earn bonuses rather than getting them as a right but more managerial accountability linked to delivering results will actually be beneficial to all.
Finally, the sellout of Ranbaxy will have a salubrious impact on many promoter family-managed Indian businesses. They now have an excellent example and reference to use while putting their own stakes on the block. In the process, many such businesses will probably get a better quality of management and thereby become stronger in the long term rather than another basket case.
It is anybody's guess as to how long the current slowdown will continue. However, it is unlikely that India (or the world economy) will pick up momentum before the installation of the next government not only in New Delhi but Washington as well.
Till that happens, we should all use this opportunity to cleanse ourselves of the excesses and the sins of omission we have all been guilty of.
