Looking back, Looking Ahead...

By Vikram Mansukhani, NOH, DIESL

While the soothsayers, pontiffs and religious zealots look on in disbelief at the last few days of 2012, doomsday as predicted by them apparently seems to have been a misnomer. Our world still exists physically, although scarred by   incidents such as Hurricane Sandy , Typhoon Bopha , the shootout at the Connecticut children’s school , passing away of legends like Rajesh Khanna , Yash Chopra , Pandit Ravi Shankar  and most recently the passing away  of  India’s  symbol of “Nirbhaya”. The global economy has yet to shake off the fallout from the crisis of 2008-2009. Global growth dropped to almost 3 percent in 2012, which indicates that about a half a percentage point has been shaved off the long-term trend since the crisis emerged. This slowing trend is likely continue. Mature economies are still healing from the scars of the 2008-2009 crisis. But unlike in 2010 and 2011, emerging markets did not pick up the slack in 2012, and are not expected to do so in 2013 either.

A more significant slowdown is expected for less mature economies over the next year – and beyond. Overall, growth in developing and emerging economies is projected to drop from 5.5 percent in 2012 to 4.7 percent in 2013, with growth falling in China from 7.8 to 6.9 percent and in India from 5.5 to 4.7 percent. From 2019-2025 emerging and developing countries are projected to grow at 3.3 percent. The long-term global slowdown we project to 2025 will be driven largely by structural transformations in the emerging economies. As China, India, Brazil, and others mature from rapid, investment-intensive ‘catch-up’ growth to a more balanced model, the structural ‘speed limits’ of their economies are likely to decline, bringing down global growth despite the recovery we expect in advanced economies after 2013.

The last few years, have though not been referred to as the years of global meltdown or the dark ages of economic recession as in the late 20’s, the mood and the sentiment they have created are one of extreme conservativeness. None of the business houses or large scale entrepreneurs has put their money where their mouth is and have rather looked at growth opportunities rather cautiously. Projects involving huge infrastructure investments have been few and far between as all decision makers are keen to pursue ROI in the short term versus long range projects.  The silver lining behind the clouds is that India is still considered a favorable destination for FDI which is expected to grow considerably by about 20% in 2013. With the Government of India laying intense focus on increasing the country’s share in the global FDI space from 1.3 per cent in 2007 to 5 per cent by 2017 by relaxing and un-complicating the FDI norms, it is expected that foreign majors would invest aggressively in the flourishing Indian markets. While this is a positive sign , the issue overall I the lack of certainty as to when these investments would come in , exactly in which sectors and what resistance would it face in a year before the country goes to the polls in 2014.

The year ahead is full of opportunities but needs optimism to ignite the actions on the ground. Making the most of available resources , expecting the biggest bang for the buck , consolidation of operating areas , increased focus on ROI and driving increased productivities shall remain as the mantras for survival in 2013 which hopefully shall build the platform for a flying start to 2014 and beyond.