Recession – A Blessing in Disguise

There’s a huge hue and cry about India going into the recessionary phase. The business newspapers suddenly changed tract from a confident, positive tone to pointing to a bleak future. There was a hint of negativity everywhere. But is recession so bad... well I would like to differ.

Ever since the government brought in financial reforms in India, prosperity was bench marked against the GDP growth rate of the country. But the concept of considering the GDP as a reflection of the economic prosperity of the people is in itself faulty. Considering that three-fourths of Indians depend on agriculture for their livelihood, the contribution by agriculture to the Indian GDP is a meager 20%. Contrast that to the 55% contribution by the services sector where the people involved are much less in number. This unbalanced situation led to an increase in the disparity. While less people earned a huge sum of money, the majority of Indians continued to suffer. While India’s GDP was growing at a scorching pace a couple of years ago, the agricultural sector lagged behind. As a consequence, the present recession has affected a small minority. The lives of the vast majority remain unaffected by the trauma unleashed by this recession. A large majority of the population stays away from the capital markets.

Moreover, during the market boom and the bubble that followed, India missed the social growth. According to economic theory, social growth comes before capitalist growth. Since we missed the social factor, the zooming stock market was never recession proof and stable. The capitalist growth that India witnessed during the last decade made everybody coherent in their views that the economy was overheating. It was only a matter of time before it cooled down. Luckily this recession will give the people time to think and take a step forward in a planned and organized manner, much unlike the last time when things were haphazard. The social initiatives of the Central government will go a long way in bringing about social prosperity – a precursor and the backbone of economic prosperity. So next time when India experiences a boom, it will much more prepared and in a better condition to handle all the FDI and the FII inflows flooding the shores of the country. Only when each and every Indian witnesses prosperity, we can look to the GDP numbers and the Dalal Street figures to get a sense about the direction in which the economy is headed.

This recession changed the way I think on a host of topics. It’s not that I prefer socialism over capitalism. But I value one advice I got recently –

Beware of naked capitalist propaganda