These days, there are two distinctly different tales
that you hear in corporate India. The first is what
I call the public platform-chambers of commerce-apex
industry association narrative. The second is a very
different story, which is usually shared in smaller
huddles, and outside the realms of public
The first tale is told on the rostrum, often
accompanied by smart PowerPoint presentations, and
at some big FICCI or CII event — especially one
where the chief guest is a minister or a high
ranking official of the union government. The story
runs thus: There is no doubt that the global economy
is going through severe contraction, led by the US,
the UK, continental Europe and Japan. Yes, it will
affect growth rates, though it will hurt us less
than China because we have a larger cushion thanks
to our domestic demand, while China is
over-dependent on world trade. But let’s not
exaggerate the pain. After all, we will grow by
around 6.5 per cent in 2008-09, and will achieve
roughly the same growth next year. Look at the
growth forecasts of all major countries. Everyone
that matters is in negative growth territory, except
India and China standing tall at over 6 per cent.
Let’s appreciate how good the three fiscal stimulus
packages have been. Let’s laud the proactive role
played by our government and the Reserve Bank. The
pain will be for just a short while. Come the second
quarter of 2009-10, we will be back in action. India
has everything going for it. Let not a minor blip
come in the way of this being India’s century. Thank
you, ladies and gentlemen.
A round of hearty applause from the front rows. An
appreciative look from the minister of senior civil
servant from the high table. And the VIPs have been
effectively secured for gracing yet another event.
At the end of such a speech, if you looked closely
at the back rows — populated by the not so important
chaps who are struggling their guts out trying to
make ends meet in these times — you would have seen
a great deal of incredulity. But the back row boys
don’t really matter in terms of significance,
consequence, connections or resources. They are
statistics that swell the membership. So the eyes
don’t stray that far away. And yet, they too have a
tale worth recounting.
Think of medium scale auto component suppliers in
northern India — the solid, entrepreneurial, hard
working fellows who you see in Gurgaon, Manesar,
Faridabad, Ludhiana, Pantnagar, Roorkee and Baddi.
Let’s hear their story. It is a very different one.
The lucky ones have seen their order books slashed
by a third; many are facing a 50 per cent drop in
their orders. In the last couple of years, they had
raised capacities being told that 9 per cent GDP
growth would never end. Funds for expansion were all
too readily given by banks and other NBFCs,
irrespective of the borrower’s low equity base.
Remember, even 18 months ago, you were told never to
worry about silly old concepts called high leverage.
Now the lines are empty. The poor fellow is also
being hit by additional depreciation and higher
interest costs. The same banks who were only too
willing to fund him to the hilt are playing coy
about extending his overdraft limit. They are asking
for additional promoter guarantees, as well as extra
margin calls to cover that part of the loan which
was backed by shares. The customers have slashed
prices. Even worse, firm orders are getting pushed
back or cancelled outright at about the time when
the raw material has moved to the shop floor for
This is true not just for auto component
manufacturers. Ask people who run textile mills,
forge shops, small machinery units, foundries,
repair shops, gems and jewellery manufactories,
clothing and apparel businesses, accessories, travel
and tourism agencies, retail outlets, cement plants.
To a person, they will tell you exactly the same
tale. Sharp reduction in order books; even sharper
fall in prices; banks forsaking their customers,
especially the foreign banks who had muscled their
way in over the last decade; rapid increase in
receivables; and every rupee coming in being treated
like a gold mohur — to be cherished and not spent.
Forget strategy. Forget about growth planning.
Forget how independent India will look at 75. Just
deal with the crunch of today.
Yes, I do believe that we will come out of it
quicker than the OECD countries. At least to a 7 per
cent or 7.5 per cent growth path. But in the
meanwhile, let’s understand the pain. And do
something to help those thousands of back benchers
in CII and FICCI events — those who want their voice
to be heard, their pain to be shared, their hands to
Published: Business World, March 2009