It's the economy...... St---d

I see so many articles in the papers over the last 2 weeks andsmile..... smile a satisfied man with a bit of a "I told you so...."pride. In December '08, when the World was in deep throngs of agony and some prophets were predicting that the end could be nearer than anticipated, this author was solidly maintaining that things would be different for this country (India) in particular and we would see a turn around in 2nd half of 2009. When our Country Head asked me on Jan 1st of this year how do I think Q1 (Jan - Mar '09) would pan out, I told him "tongue in cheek" thatour businesses would finish only slightly below budget but would show a growth of 10% over Q1-08. He was incredulous and told me to be careful not to be too positive and these were unprecedented times and he, in his career, hadn't seen anything like this before and had seen at least 5 downturns in the past. I, as is my wont, stuck to my"contra" guns. But...... I was wrong and we could grow only by 9.6%;-) Why was I sanguine about India when it was completely a contra view to conventional wisdom? A few things that I based my view were 1. Govt had just (late 2008) released Rs. 29000 crores into the economy in the name of the 6th pay commission. A similar amount would also be released by the State Govts. Means between Rs. 55 to 60 kcrores pumped into the economy that was thristy for liquidity. This would also be complemented by the General Elections which would put more money into the economy. 2. We have between the ages of 18 and 32 yrs, around 240 to 280Million people. That is pretty darn close to the entire population ofthe US (300 Mn) and 50% more than all of Brazil and equal to thecombined populations of France+Germany+England+Spain..... Btw, the median age of India is 24.9 yrs while it is above 40 yrs in most other developed countries. Means we are a young country. While many of these 240-280 Mn "kids" are in the villages/small towns(50%), more than 70%of them are already married and hence are consumers in some sense. Also this segment of the Indian populace were all born or grew up post Emergency and during the Rajiv Gandhi years when India started to open up. Many of them have not seen famines or deep misery. Hence their instinct is to spend money rather than save it contrary to their parents who would have been born in the 50s and60s. And we see that happening when we go to malls in big cities or tothe market in smaller towns or villages. This group of young people still sound upbeat and are generally unaffected by the downturn. Even though many have started to worry about losing their jobs, they still feel they can "manage" or even get another one quickly with a pay cut. What also supports the above is some recent data a banker friend of mine shared with me. He said, in 2007 the level of self financing for carswas 7-8% whereas in recent times it is 40%+. Means, when banks tightened up credit or upped interest rates, people simply broke into their savings and paid for a car!! Does not sound like an Indian inhis 40s or 50s ever doing that! Gotta be the young people. 3. The third factor is the across the board cut in VAT/excise duties by Govt to provide further stimulus to people. Heard from my friends in a major passenger car manufacturer that they did not have enough cars to sell on 30/31stDec 2008 and they had to "default" as they did not anticipate the sudden surge in demand for cars and that too in a traditionally very slow month of December. What triggered this buying frenzy was the cut in Excise duty by 4% on 21 Dec '08!! 4. The fourth and often forgotten factor in the press is that monsoon and agricultural output in latter part of 2008 has been strongly positive. This combined with the global softening of food prices has been another blessing for India. In addition, many invisible costs such as container rates and sea freights have all crashed thanks to global downturn. All this is helping India in spite of the spike in USdollar rates. It is therefore my sense that India has quietly ridden out the worst phase of the global economic downturn (GED) and is poised for relatively good times ahead. There is evidence also of the US recession bottoming out and economy starting to turn around. It is now only a matter of time (few months) to get back on track. Political uncertainty may temper some of this in the short term forIndia but there are enough pointers that we will not struggle to find our next PM and Government between the Third Front, Congress and BSP(yes BSP and not BJP!!) and right now am putting my money on M.... (Not the current PM)....... :-)