Shrink To Survive

With economic storm clouds on the horizon, it is time to do some contingency planning. Better to be prepared to survive an economic downturn than to be a victim.

- Michael Evans

Teresa John, an economist at Nirmal Bang Equities Private Limited in Mumbai, said in a recent report: “Growth has now slipped below the long-term trend of 6.6% for two consecutive quarters, which implies that India is effectively in a quasi recession,” Early indicators suggest “growth remains elusive,” she added.

While the standard macroeconomic definition of a recession in most global economies is two consecutive quarters of shrinking GDP, a significant decline in economic activity spread across months is another often-used description. In India, which offers only year-on-year calculations of output, automobile sales have plunged the most in two decades.

Meanwhile, activities of eight core sectors in India have fallen to 2.1 percent1 in August 2019, sharply declining from 7.3 percent in the corresponding period a year ago.

Two Purchasing Manager’s Index (PMI) surveys conducted by IHS Markit indicate a slowdown in both services and manufacturing activities.2 The geopolitical environment A number of geopolitical factors has again created an environment of global economic slowdown, with economists predicting recession to hit the US economy by 2020-21.

A recent survey conducted by Duke University3 concluded that a recession was looking ‘likely’. As much as 82 percent of the executives surveyed are of the opinion that a recession will happen by the end of 2020.

A second poll by ABC News found that 60 percent of US consumers expect a recession by 2020, (Duke University Poll) by 2021. A third Chief Financial Officer survey4 conducted by Duke, concluded that 53 percent of finance chiefs believe the US will be in an economic recession by the third quarter of 2020, and 67 percent predict a recession by the end of 2020.