Economic
slowdown. cause and remedy
( PL READ - YOU DONT NEED TO BE AN ECONOMIST TO UNDERSTAND
THIS ISSUE )
Everyone is blaming government for slowdown . This article is make people understand what economic slowdown means , how it happens and how can be corrected .
The creation and correction lies totally in the hand of consumer . So any citizen if he blames government should read this article .
Consumer or citizens create demand by buying any product . Industries and companies are supplier who cater to the demand I.e manufacture and sell to the consumer .
Now since everyone wants a better life , have aspiration for better lifestyle products demand grows and so grows the purchase . To meet the growing demand supply also grows through more products manufacturing . Up till now no issues .
Now enters the lending institutions ( Banks and NBFCs) . Seeing the growing demand they start providing loans to individuals and capital for investment for more manufacturing .
It's a general principal of life " paav Uti hi pasaro Jitni lambi Chadar Ho " . Simply meaning live within your means or spend from your earnings or borrow only that much which you can pay comfortably on time .
But since everyone is chasing growth , availability of money is easy so overspending starts . All of us took pride in 8% GDP growth but anyone ever even questioned that was it a sustainable growth ?
What happened that very soon individuals expenses which has overgrown the income realised this and the only way they could have countered the situation is go slow in purchase I.e buying getting deferred or lowered till the income -expenses mismatch normalised . This is what led to economic slowdown . In India there are other structural changes also happening ( consumer choices and preferences changing like shared mobility through Ola ,Uber preferred in place of car purchase ) .There are many structural and demographic changes also happening leading to emergence of new style of living , emergence of new type of industries and may be some traditional industries either die or reshape themselves .
Now the supplier I.e companies have already taken loans from bank and they have to pay interest . they have got other costs ( salary cost of increased manpower strength ) but there income from reducing sales gone down and so profit also getting reduced . Now these companies think one of the decision is to lay off some employees to counter the situation .
I request my readers to see the audited balance sheet and profit and loss statement of any company which is laying off employees and crying of losses . I find in last 5 years all have earned huge profit every year , good reserves and surplus , paid good dividend also to their shareholders , good book value . So where is the loss which any of these companies are talking about . Yes profit might have got reduced vis a vis last year but is that a loss ?
Now the moment companies lay off employees or do salary cut more people are now added who have lesser money to purchase and again adding to more slowdown .
Government has to step in and through certain policy measures along with RBI they try to reduce interest rate so that loans are cheaper , some tax advantage also given so that more money for spending at the end of individuals .
Economic slowdown is nothing but an after effect of chasing unrealistic aggressive growth by all in economy but it is led by individuals and only individuals can again end this slowdown by their normal purchasing activities .
My only fear is that this economic slowdown might not get compounded because of greed of promoters of companies . They might aggravate the situation by laying off employees rather than taking the brunt for a year as they all have huge accumulated profit in their balance sheet . If these companies operate at a low profit for a year believe me this economic slowdown is just a matter of some months or max a year but if they add fuel to the fire ( laying off employees ) then will prolong. Government role is just to make policies which can ease the situation but action of individual consumers and companies will what eventually make this good or worse.
Everyone is blaming government for slowdown . This article is make people understand what economic slowdown means , how it happens and how can be corrected .
The creation and correction lies totally in the hand of consumer . So any citizen if he blames government should read this article .
Consumer or citizens create demand by buying any product . Industries and companies are supplier who cater to the demand I.e manufacture and sell to the consumer .
Now since everyone wants a better life , have aspiration for better lifestyle products demand grows and so grows the purchase . To meet the growing demand supply also grows through more products manufacturing . Up till now no issues .
Now enters the lending institutions ( Banks and NBFCs) . Seeing the growing demand they start providing loans to individuals and capital for investment for more manufacturing .
It's a general principal of life " paav Uti hi pasaro Jitni lambi Chadar Ho " . Simply meaning live within your means or spend from your earnings or borrow only that much which you can pay comfortably on time .
But since everyone is chasing growth , availability of money is easy so overspending starts . All of us took pride in 8% GDP growth but anyone ever even questioned that was it a sustainable growth ?
What happened that very soon individuals expenses which has overgrown the income realised this and the only way they could have countered the situation is go slow in purchase I.e buying getting deferred or lowered till the income -expenses mismatch normalised . This is what led to economic slowdown . In India there are other structural changes also happening ( consumer choices and preferences changing like shared mobility through Ola ,Uber preferred in place of car purchase ) .There are many structural and demographic changes also happening leading to emergence of new style of living , emergence of new type of industries and may be some traditional industries either die or reshape themselves .
Now the supplier I.e companies have already taken loans from bank and they have to pay interest . they have got other costs ( salary cost of increased manpower strength ) but there income from reducing sales gone down and so profit also getting reduced . Now these companies think one of the decision is to lay off some employees to counter the situation .
I request my readers to see the audited balance sheet and profit and loss statement of any company which is laying off employees and crying of losses . I find in last 5 years all have earned huge profit every year , good reserves and surplus , paid good dividend also to their shareholders , good book value . So where is the loss which any of these companies are talking about . Yes profit might have got reduced vis a vis last year but is that a loss ?
Now the moment companies lay off employees or do salary cut more people are now added who have lesser money to purchase and again adding to more slowdown .
Government has to step in and through certain policy measures along with RBI they try to reduce interest rate so that loans are cheaper , some tax advantage also given so that more money for spending at the end of individuals .
Economic slowdown is nothing but an after effect of chasing unrealistic aggressive growth by all in economy but it is led by individuals and only individuals can again end this slowdown by their normal purchasing activities .
My only fear is that this economic slowdown might not get compounded because of greed of promoters of companies . They might aggravate the situation by laying off employees rather than taking the brunt for a year as they all have huge accumulated profit in their balance sheet . If these companies operate at a low profit for a year believe me this economic slowdown is just a matter of some months or max a year but if they add fuel to the fire ( laying off employees ) then will prolong. Government role is just to make policies which can ease the situation but action of individual consumers and companies will what eventually make this good or worse.
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