The Hindu Business Line : Economic downturn

The normal tendency of economic players during periods of economic downturn is to slide into a mood of despondency. Their mood is tinged with fatalism if they have to grapple with an external or internal environment that is apparently out of their control. Also, they tend to look for scapegoats to minimise their own responsibility to meet the challenge.

The danger of this escapist frame of mind combined with absence of a sure and hopeful touch on the part of the Government is that it soon leads to business and industry too catching the infection. Thus a vicious cycle forms, with hopelessness feeding on itself.

It is precisely when all indices are pointing down that it is imperative for everyone on the economic front — strategic planners, policy makers, manufacturers, wholesalers, retailers, sales and marketing executives, human resource managers and, yes, the analysts of the think-tanks and the media — to pull up their socks and fight back. They must take to heart what Winston Churchill, the man who flashed the V for Victory sign at the worst moments of the war said: When you are at the bottom of a barrel, there is no way to go but up!

The aftermath of the Second World War offers the supreme (as also extreme) example of the triumph of human spirit and ingenuity which enabled the countries in ruins such as Germany and Japan to rise, like Phoenix, from ashes. Why, India itself is a spectacular showpiece of monumental transformation within two decades from what was universally perceived to be a ‘basket case’ subsisting on aid to being ranked fourth among economic giants. When faced with a slump, most economic players draw upon recipes to which they are addicted. Governments are, for instance, tempted to move interest rates up and down, juggle with duties and taxes, or go in for price controls.

Companies customarily hasten to cut costs, slash workforce, jettison inventories, curtail their domestic and overseas operational commitments and generally, withdraw into a shell, courting thereby the risk of being over-taken by rivals. It is not that these measures, which are essentially palliatives, are to be scoffed at. For, they do provide symptomatic relief, but more of the same traditional medicine very often ends up reducing the R&D investment, market share and customer base.

Dynamic equilibrium

Actually, although such an advice may go against conventional wisdom, downturn is the time for all the economic actors — the Government, corporates in the public and private sectors, tiny, small and medium enterprises, banking and financing institutions — to become aggressive and forge a self-confident, united and galvanising front to launch the upturn.

The most essential part of this concerted effort is to ensure that it acts as a stimulus for audacious, out-of-the-box strategic thinking aimed at not only maintaining, but increasing, the tempo of economic activities.

India is more favourably placed in these respects than most countries. Those, whether in the Government or India Inc., who have their hands on economic levers, can hold their own in terms of intellectual grasp of issues, professional mettle and innovative capability with the best in the world. Secondly, India Inc., in particular, has shown itself to be equal to managing any setbacks without flinching and has all the appearance of an unstoppable juggernaut. Finally, India’s diversity and complexity are in themselves of help in enabling it to improvise its responses to both opportunities and threats since in the overall positive and negative factors are always in a dynamic, constructive equilibrium!

B. S. RAGHAVAN