India Post News Service

NEW DELHI: Last month was a nightmare for the Indian market as a probable US recession threatened to retard global growth. From IPOs getting pulled out, issues not being subscribed despite lowered price bands and tragic listings, we witnessed it all. But is the bash at the primary market over? Not really… Can India ride out the US recession storm is now the big question.

The links with the US market and therefore the impact have been evident: on January 21, Martin Luther King Day, American markets were closed- but there was a sell off world-wide. India and Germany saw stock prices drop over 7 percent, while China and Britain had a 5 percent fall. The Indian shareholders were left poorer by Rs 6.7 lakh crore by just that jolt.

As uncertainty grips the world and the US flounders between sub-prime crisis and credit crunch, economists around the world are offering a plenitude of opinions, uniting only in the fact that it is impending. What they differ on is the intensity of the calamity. Consider just one comment by Bloomberg news, "US corporate profits are in a recession and the entire economy may not be far behind."

Hence the rushed job carried out by the Fed Reserve (75 points cut in interest rates) and the Bush administration (a $156 billion stimulus package). And emerging markets, which by definition, are provided balance by the consumerist czar of the economic world, are bound to be buffeted about. That New Delhi is concerned is clear: the pre-budget economic survey and Budget 2008 depicted that curbing inflation is top on the priority list.

"We have a large number of poor people who don't feel anything about growth. Their main concern is inflation. The US slowdown has inflationary concerns, which we need to cater for," Finance Minister P Chidambaram told CNBC- TV 18. The comment is almost a red flag notice that the Indian Government is aware India is not immune to the possible slump. It is certain that many sectors in India may bear the brunt. Especially housing, white goods, export and outsourcing.

A Sakthivel, Vice President Federation of Indian Export Organization warns that exporters have already lost 15 percent of their business and if the US recession seriously hits India, the figures may double. Today globalization is out of the economist's lexicon, the buzz words now are decoupling, isolation and insulation. "India has become more integrated with US and the rest of the world but we are more resilient and our growth engines are very strong," says Mira Malan, Economic Strategy professor at Delhi University.

She believes that India's strong purchasing power, in tandem with the rising income levels could act as a possible counterfoil. Relatively low reliance on exports is another strong anchoring point for the Indian economy. New Delhi's exports constitute 33 percent of its gross domestic product in comparison to a whopping 70 percent of Beijing. That the rising rupee has affected the IT industry is evident: one effect has been lightened pay packets.

For instance Tata Consultancy Services, Asia's largest software services firm and India's largest private employer recently informed employees of a looming 20 percent cut in the variable component. The reason: the US is by far the largest marketplace for Indian outsourcing services.Pankaj Shukla, Global Policy Professor at Jawahar Lal University and author of the recent book, Redefining Planning, believes that much depends on the drivers of recession.

"The real estate downturn that began in US last year didn't have much of an effect on the rest of the world because housing is actually a domestic story." He also feels that politics and the upcoming presidential elections are significant decisive factors. "Till November, the capital most likely would follow an outward motion, as there is Iraq war, falling employment, consumer pending flagging and tightened credit conditions." Great time for NRIsFor the Non Resident Indians (NRIs) however it is a great time to go bottom-fishing for quality stocks at lower levels.

Recently, when the investors back home pressed the panic button after the sensex crash, the ones abroad chose to stay invested. "Most NRIs invest money in excess of Rs 5 Lakh in shares. Analyzing the fall it is evident that they have lost serious money this time round. But still there is an optimistic turn-out of investors from abroad," said JRG Securities Managing Director Gilby Mathew.

India Inc. is certainly on a high, but you haven't seen anything yet; in market shares and sheer size, Indian companies are still toddlers. Buy that stock, and you'll watch it grow for several decades. What this means is that your investing dollar today will return for a long, long time. Most importantly, investing in India makes sense because the stock market is disciplined and professionally regulated. Yes, there are those who ask for more freedom (laxity?) in the system.

In its present avatar, the market offers an investor short- term anxiety in the form of volatility; but it guarantees you long term happiness in returns. Basically the recession story is not that frightening after all. The GDP shows a healthy 8.5 percent growth rate. Moreover if the US economy- with the highest NRI population- is slowing down, it is brightening prospects for the country in a way. The NRIs in turn are returning back home, adding to remittances, favorably for the economy.