While we aspire to be the best in 2023, we also have to sweat it all
Posted Date – 12:30 AM, Sun – 1/1/23
go through B Yeram Raju
2022 has left us with bad taste in every way. It reminds us of the recessions of the 1930s and 2008, of endless inflation, job losses, energy crises, internal conflicts, the ongoing struggle with re-emerging Covid-19, and severe disruptions to global supply chains, while China remains a closed country for more than six months, and Russia’s war on Ukraine shows no sign of ending. Reviewing the facts should lead us to a durable future and a happier 2023.
economic recession
According to McKinsey, “A recession is a part of a business cycle that involves an economic contraction.” A recession typically begins in one geographic region and then spreads to other parts of the world. It means unemployment, less saving, less consumption and affects all classes of the population. This time, the world was engulfed at once by the pandemic and the subsequent war in Ukraine, leading to multiple crises.
Lessons from the Great Recession (1930s) showed that companies that showed greater resilience focused on improving margins through proactive cost cutting, while others were reactive in taking such steps. Measuring demand, gauging people’s emotions as they look at their wallets, keeping tabs on opportunities and failing competitors, and moving quickly into thriving supply chains are ways to fight a recession.
India and the world today reminds me of Michael Spence, the Nobel Laureate and author of The Next Convergence (2011). Many question the upcoming changes in the political sphere. The answer to this question is useful even today. “The unifying answer is no, the fundamental approach to growth and development is now firmly embedded in politics and the civic mind. Going back or departing from the current course will not be a viable political option,” Spencer said.
With more job losses than during the 2008 recession, big tech companies like Meta, Twitter, Netflix, Microsoft, and others are all making mass layoffs. In 2008, tech companies laid off about 65,000 workers, but this year they have laid off more than 150,000 worldwide, according to global reemployment and career transition firm Challenger, Gray & Christmas. Tech startups to lay off 18,000 workers in 2022.
severe supply chain disruption
The Business Development Bank of Canada conducted several investigations into pandemic-induced supply chain disruptions in November 2021 and March 2022. Among SMEs, 75% by November 2021 and 85% by March 2022 are the worst hit.
On the supply side, causes include health restrictions and factory closures, especially in China, and even the ongoing lockdown of the entire country through 2022. The enforced closure of the tourism industry has disrupted travel plans, severe labor shortages and disengagement of the mobile workforce have delayed production and even shut down businesses of many different sizes and countries.
On the demand side, significant government fiscal stimulus, more online shopping, and faster digitization have helped reduce the intensity of the economic recovery. The combined effect of limited supply and buoyant demand has led to shortages of inputs such as consumer goods and semiconductors.
The transport and warehousing sector is also under intense pressure, with port congestion and staff shortages leading to longer delivery times. All of this is reflected in strong inflationary pressures, which remain unabated.
soaring inflation
The OECD Annual Report 2022 confirms that financial market conditions have deteriorated against a backdrop of inflation, slowing global growth, volatile commodity markets and persistent geopolitical conditions. “A number of central banks in both advanced and emerging economies have raised policy rates, and some of them have already begun to reduce the size of their balance sheets, amid growing concerns that inflation could continue to rise.”
Inflation affects the poor and middle class more than the rich. Higher inflation expectations lead to higher interest rates, leading to lower corporate profits and lower global stock prices in 2022. U.S. Treasury and repo funding markets have come under pressure as the Fed shrinks its balance sheet. Markets are wobbling amidst severe uncertainty and volatility triggered by energy price sensitivity and oil prices breaking above $100 a barrel.
“Inflation picked up faster, surged more sharply, and proved to be more persistent and persistent than major central banks initially thought might be. … Of the 34 countries listed in the IMF’s World Economic Outlook as advanced economies, Fifteen countries had inflation above 5% for the 12 months to December 2021. Such a sudden (by modern standards) collective jump in high inflation has not been seen in more than 20 years,” said a World Bank blog. It highlights that, unlike the oil-based supply shocks of the 1970s, Covid-19 supply shocks are highly diverse and opaque, and therefore more uncertain.
green cash
When the oil crisis hit in the 1980s, to weather the storm, the world created Special Drawing Rights — an international reserve asset created by the IMF in 1969 to supplement the official reserves of its members — and petrodollars , the dollar is traded globally for crude oil — oil exports. The world is now surrounded by climate risks. Now is the time to convert carbon credits into cash vouchers based on the polluter pays principle. The UN should take the lead in creating a carbon-proof dollar that turns carbon credits into cash for future development, and in doing so, devise ways to jointly fund democracies through green euros, green pounds and green dollars.
India in a chaotic world
Like many other countries, India has witnessed an increase in the cost of sovereign, household and corporate debt and credit risk premiums. Growth forecasts for all companies have collapsed. Reserve Bank of India Governor Shaktikanta Das recently warned against banks’ credit quality in general, especially real estate and housing assets amid unfavorable macroeconomic conditions.
Several inefficient co-op city banks have proven themselves over the past few months. Depositors and digital customers get some comfort in grievance redress. KYC (Know Your Customer) changes reflect trust in citizens. Higher UPI penetration, greater volume of digital transactions (although cash is still king), reduction in hidden NPAs (thanks to the creation of state restructuring companies – bad banks), and the introduction of digital currencies are clearly helping financial stability.
The Reserve Bank of India has launched a new initiative to prevent fraud. However, unless and until the system can detect internal fraud perpetrators and ensure that bank employees have the domain knowledge to accompany knowledge of the system, such an attempt will take significant time and resources to be effective.
manufacturing growth
“The fourth industrial revolution represents a fundamental change in the way we create, exchange and distribute value. It is a technological shift that merges our physical, digital and biological worlds.” In this Under the circumstances, the best mantra to fight inflation is to give manufacturing the biggest boost ever by declaring 2023 the year of manufacturing of all sizes and industries. The country is poised to make such a statement as it focuses on $5 trillion in infrastructure spending and develops logistics policies.
There is context when looking at HR through the lens of talent attraction, diversity and retention. We can no longer risk producing degree holders who are unfit for the industry. All countries are aware of the need for close coordination between industry and academia. Innovation hubs in manufacturing and IT have emerged in several conscious states such as Telangana, Tamil Nadu, Maharashtra, Haryana, Gujarat and Odisha.
Small, medium and micro enterprises, the core of manufacturing
The establishment of Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) and National Credit Guarantee Corporation during the first phase of Covid-19 has not accelerated commercial banks’ lending to targeted SMEs to the same extent as under India’s new Insolvency and Bankruptcy Code. A pre-packaged plan for the revitalization and restructuring of micro, small and medium-sized enterprises was launched. There is a need to revisit these schemes and examine the need to create appropriate insurance mechanisms for MSMEs to improve their access, availability and resilience.
richer and poorer
India has seen a billionaire boom between 2011 and 2021. Excluding billionaire legislators and MPs, wealth creators increased from 45 to 140 during the period, contributing 19.6 percent of GDP.
The number of poor people decreased by about 415 million. Poverty reductions are fastest in the poorest countries, where deprivation falls significantly among the poor across all indicators. But according to 2020 population figures for India, it has by far the largest number of poor people in the world (228.9 million), followed by Nigeria (96.7 million). New joint Multidimensional Poverty Index (MPI) shows that while child poverty rates have fallen faster in absolute terms, India still has the world’s largest number of poor children (97 million, or 21.8% of children aged 0-17 in India) United Nations Development Program) and the Oxford Initiative on Poverty and Human Development.
India will also surpass 1 billion internet users and $400 billion in online spending by 2030. Google wants to expand 100 startups, while the Ministry of Electronics and Information Technology aims to similarly expand startup hubs across the country.
But “most internet users are in the urban educated class. This situation reflects the fact that most Indians remain indifferent to the information technology revolution. With such wide gaps in digital access and literacy, it is difficult to achieve inclusion and equity.” …India is projected to have the largest working-age population, which requires rapid job creation. Digital literacy emerges as an important medium to communicate with global citizens,” says NITI Aayog post (February 2022).
When we look at leadership, the nation is at a crossroads. History has shown that democracies have a knack for allowing a leader to envision a bright future rather than a glorious past or an imminent present. As we aspire to be the best in 2023, we also have to sweat.
(The author is an economist and a risk management professional. Opinions are personal)
