We are entering into recession period globally and the
exception is likely to be India and China with ~2% GDP growth in 2020 which is
way below ~5 - 8% in the past several
years.
For the benefit of all, I am sharing my perspective on such
scenario on few aspects as below:
What will change during the slow down:
1. Spend on luxury will come down drastically
2. Long-term / Capital expenditure such as construction,
technology will be almost cut to nil
3. Lifestyle expenditure such as salary, rent,
infrastructure, entertainment will be minimised
4. Working capital will be under tremendous pressure.
Businesses will go out of business especially those who are riding on borrowed
working capital
5. New innovative business models will evolve
What will NOT change during the slow down:
1. People consumption on essentials will continue
2. Rise in Investment on ideas / technology solutions that
will improve efficiency
3. Short-term trading businesses with healthy cash flow
practices will thrive
4. Rise in investment on spiritual / self-learning practices
5. Value for money products / services will shine
What you should do as an individual:
1. Hold back any luxury / high risk investments where visibility
of returns is difficult to predict
2. Minimise expenditure on the routine stuff - keep a watch
on your lifestyle spend - ask the question, is it really necessary!
3. Develop yourself on improving competency and developing
skills to become more sharper and efficient
4. Share the financial situation with your family members
and educate them on the family financial position and the plans to improve
5. Invest - yes invest on the right things. History repeats.
Take risks based on thorough research. This is not the time to follow tips.
What you should do as an Entrepreneur:
1. Take care of your employees - communicate more than ever.
Be reasonable and transparent with them
2. Use the slow down to improve your processes / people
3. Invest in technology / systems that will accelerate your
reach in adding value to your customers
4. Be frugal in working capital decisions and operating
expenditure
5. Capital expenditure to be on hold unless there is clear
visibility on the associated returns
Let us get smarter by helping ourselves and economy to
bounce back stronger. We can discuss / interact / improve upon on any of the
aspects. I would be Happy to receive
your thoughts / suggestions / ideas.
by :
CA Yogesh Birla
Director
Birla WP Management
visit us at : www.YogeshBirlaCA.blogspot.com
Birla WP Management
visit us at : www.YogeshBirlaCA.blogspot.com
We feel it will be 2%
ReplyDeleteYes, all depends on how much impact of corona on India. How fast we recover and restart to encash opportunities.
DeleteNicely put thoughts
ReplyDeleteThanks a lot Sunil ji.
DeleteStay home, Stay safe.
Businesses are going to be affected by backward integration.Indian economy will be more focused on healthcare sector.
ReplyDeleteYes mihir ji,
DeleteI endorse your focused sectors, indian industrialists will have to remain focused with value added products and controlled costs.
Very precise and nicely put sir...
ReplyDeleteThanks a lot Nikhil ji....
DeleteApprox 2% GDP may be Fall down.
ReplyDeleteNecessary to do change business & lifestyl as our situtation.
Adding point to your individual section that one must keep cash liquidity with them.
Yes, cash is king in pandemic situation. Liquidity with investors will reap best fruits in available investment and business opportunities.
DeleteJudicious forecast...
ReplyDeleteThanks,
DeleteBetter India needs better strategic plan.
It's a wonderful speculation let us see how market works
ReplyDeletespeculation supported with proper strategies, results profits. Wish entrepreneurs and investors make it a better india.
DeleteIs it more harmful recession than 2008 recession...
ReplyDeletecorona pandemic is not comparable with any earlier recession, its unique in its own impact.
DeleteNice one.
ReplyDeleteIf u want to buy something....give it a break of 24 hours.....than only if u feel the necessity....buy it.
yes, now there is a thick border line for spending on luxury or necessity. Liquidity will remain kind for coming years.
DeleteTrue
ReplyDeleteDramatically changes would be there.
Yes, corona is not comparable with anything in last 100 yrs history. So dramatic changes will be there. Enthusiastic investors, with proper risk hedging strategy will earn well.
DeleteWorld economy will continue to show it's downfall till the Corona scare is in our lives,it may take many years to bring it back on tracks, I may look passimistic but our lives will take many years to come back to normal, 2020 is just the starting point of its slide
ReplyDeleteEvery pandemic has its own age to come and to go back. It leave many scars on economy and stock markets. Prudent investors, with proper risk hedging will do well and encash opportunities.
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ReplyDelete