The recent financial world turmoil had put me in deep thought and so many pessimistic thoughts keep poping up…. which is so unlike me, I am the epitome of optimism 
Let me clarify that I’m not any economist or financial analyst. This is more like a layman’s view of whats happening, based on what I read in articles, maganizes, news and research in the internet. And when these are digested inside my head, I get all these bad burps, more like the worst case scenarios.
India has been touted as the economy that will handle all kinds of crisis. But I really wonder if India will be able to handle the impending economic slowdown following the financial crisis.
A number of financial and investment banks have gone underwater, vanished overnight. Some filed bankruptcy and some were sold off just like that, no questions asked. The US fed is planning a bailout package of 700 billion USD. Nobody knows if this will be enough, nobody know if it will work out. This is just the end of beginning says Swaminathan Aiyer ( he writes a column ’swaminomics’ in times of india)
My take on the bigger reason for slowdown in the US is becos of unbalanced money flow. Traditionally US had embarked on wars to create a ripple demand that starts to roll the economy. Currency flows into India(by way of cheap services) and china(by way of cheap products). China reinvests most of the trade surplus into US treasury by buying US bonds. Indias internal consumption was larger and the money never flowed back. So Net money flow into US has gone down drastically.
India spends most money on buying Oil to generate power for its own economy. Now all the hard push in getting nuclear power technology to India is understandable. The easing of demand for oil would certainly help. But this is only a single step, there are more steps required.
US jobless claims have gone to almost 600,000. The unemployed insurance claims are bound to increase. There are so many lesser people to pay taxes. On top of it add those tax rebates. There is a slowdown in consumer spending, which will soon reflect in the margins. Soon companies will start going down the drain, unable to keep itself alive. laying off people left and right. The cycle could continue…
American politicians will be under tremendous pressure to recreate jobs for the americans. The are definitely going to consider eliminating all tax sops for outsourced projects and insist on giving “American jobs to america”.
India has a lot of exports, textiles for instance. These will definitely take a hit. Almost all exports will suffer.
Indian economy is mostly driven by outsourcing. The first to be affected will be BPO/KPO services. If tech is even touched indian economy is in real trouble. Indian government does not even offer the equivalent of unemployed insurance. This will trigger indian version or the indian equivalent of sub-prime crisis.
Reality and real-estate will tumble down and a lot of allied jobs created in that sector will vanish. I dont think India is set to handle it. Exports will fall, jobs will be lost there too.
Lets face it almost all economies have gone through at least one depression cycle, no amount of regulation can prevent the impending crisis. Congress should be happy becos when all this could or would happen, they will not be in power. This could provide them a means to come to power in the subsequent election.
Atleast for now it appears that China could be the only real super power, given that American economy runs on trade deficit of the order of several trillions. This is deficit is funded by china which has bought the treasury bonds. Even if it thinks about selling off those treasury bonds American economy will go straight down. But americans can always say, those bonds are not valid anymore and laugh out loud at chinese foolishness 
Sit tight, save the buck and keep your eyes wide open. The bad is here, worst is yet to come. The good is still long way away, but will surely come someday.
