Vikas Rikhye

This a Guest Blog Post by Mr . Saurabh Dhawan. Shurabh is 22 years of age and is pursuing MBA from IIPM. He can be contacted at saurabh [dot] 3767 [at] gmail [dot] com.

The recent meltdown in US market due to the sub prime crisis is having an impact on Indian corporate sector. The unemployment rate in united states stood at 6.5% in October 2008 .The number of registrations for bankruptcy is exorbitant .

United States is a big consumer of goods produces by developing countries. As the consumption pattern in US economy is going down the demand for goods produced by these countries is decreasing. India’s exports to US are $ 24.1 billion which is increasing 10% YoY. India is a major outsourcing partner, as an FII (Foreign institutional Investor in Indian stock market) and FDI (Foreign Direct Investment by US companies) and big importer of consumer goods, textiles, medical and diagnostic products, engineering goods and many more.

The impact of the crisis is not visible on the balance sheets of the Indian companies as a whole baring some MNC’s and BPO which are on a job cut spree.Till now because most of them had there order books full for 6-8 months but the meltdown in demand can be visible from Q4 (January09 to march09) and we can expect some cut down in jobs by Indian companies in Q4 because the effect will be a slow pinching process.

We will witness a short period slowdown in growth rate of India’s exports to US to the tune of 20-25% which comes out to 7.5% to 8%. It is for economists to predict for how long the recession will last but the $800 billion bail out package which if effectively channeled into the system and if some strong structural and monetary policy changes are made by the new US government under the leadership of Barrack Obama helps to prop up demand in US economy and get the US and world economy back on track.

Saurabh Dhawan