News / Economy

    Plunging Currency, Consumption Slowdown Hamper India's Economy

    The Indian rupee recently lost nearly 20 percent of its value, a move that could further slow growth in Asia’s third largest economy, September 2013.
    The Indian rupee recently lost nearly 20 percent of its value, a move that could further slow growth in Asia’s third largest economy, September 2013.
    Anjana Pasricha
    As a plunging currency and a slowdown in consumption hamper India’s once vibrant economy, many industries are facing the prospect of plummeting profits. 

    Usually at this time of the year, consumer companies look ahead to windfall profits. Starting in September, consumption increases because it is considered auspicious to buy new products such as cars and televisions for the main Hindu festival, Diwali, to be celebrated in November.    
        
    But this year the mood in most corporate headquarters is pessimistic. The reason: the plunging rupee. India’s currency has lost nearly 20 percent of its value in recent months, pushing up costs for companies that rely on imports of raw materials. That is a large number ranging from electronics to automobiles.

    Shantanu Dasgupta is vice president for corporate affairs and strategy at Whirlpool of India, which sells appliances such as washing machines and refrigerators. He says the depreciation of the rupee is a blow to their industry.  

    “Considering that we have gone through a highly inflationary period for the last 18 or 24 months, the ability for any company in our industry to absorb these increases in input costs is limited or has vanished," said Dasgupta."So invariably it leads to an increase in consumer price finally.”

    Prices of consumer goods are rising at a time when inflation and the collapsing rupee have already sent food and fuel prices spiraling. So consumers, already coping with higher monthly household bills, are cutting back on buying cars, televisions and refrigerators.
     
    That is not good news for India, whose economy is highly reliant on domestic consumption.  The country weathered the 2008 financial crisis on the strength of high spending by a rising middle class. It became one of the bright spots in a weakening global economy for many investors and companies.
         
    But the impressive eight percent growth rate during the boom years crashed to about half that in the April to June quarter of this year. Growth in private consumption hit a record low in the same period.  

    Salary hikes have been lower. Bonuses in the festival season are likely to be less generous as many companies post their slowest growth in three years.   

    As a result, the mood in India’s middle class has changed. Rahul Mane, a New Delhi resident with a young daughter, says he has no plans to buy any big items this festival season.  

    “Two years ago, it was quite different," said Mane."Getting into a mall or spending, you did not have a second thought how you are going to manage. But now you know, every bit matters, so one is trying to save every drop... It’s pinching a lot. We’ve cut down a lot of things like moving around, going on small trips, even buying vegetables, fruits, we are moderating I would say. ”

    Faced with a steeply higher bill for oil imports on account of the collapsing currency, the government has warned of further increases in gas and diesel prices and other austerity measures. This could worsen inflation and make a bigger dent in disposable incomes.

    As a result, many fear that things will only get worse before they get better. Among them is Dasgupta of Whirlpool, who admits that this festive season is not going to be a “heady one.”  

    “If you are going to withdraw subsidies on diesel and petrol, these are measures that are definitely good for fixing our economy, but are going to increase the cost of living thereby impacting our industry negatively, adversely," said Dasgupta."Hence, I don’t see any signs of immediate hockey stick or reversal of fortunes coming.”
     
    The consumer slowdown is also contributing to an industrial slowdown. Many companies have put expansion plans on hold as their profits plummet and they post negative growth. Manufacturing output contracted in August for the first time in several years.  

    D.K. Joshi is chief economist with Crisil in Mumbai and says this could mean the loss of jobs.

    “Incomes have slowed down so demand slowdown is impacting.  Manufacturing has become less competitive," said Joshi."Indian manufacturers are going out and getting stuff produced outside India like in China. It is very difficult to turn this sector around.”

    Policymakers are trying to sound a reassuring note, saying the economy may be down, but it is not out. However analysts say the word “austerity” is likely to be heard much more frequently in India in the months to come instead of the word “boom”, associated not long ago with Asia’s third largest economy.

    You May Like

    Video As Refugees Perish, Greek Graveyards Fill

    Before burial at overflowing cemeteries, unidentified dead being swapped for DNA, in case some day relatives come to learn their fate

    Russian Opposition Leader Sues Putin for Conflict of Interest

    Alexei Navalny tells VOA in exclusive interview why transfer of $2 billion from country’s wealth fund to company with ties to President Putin’s son-in-law triggered lawsuit

    How Diversity Has Changed America

    Over the past four decades, the level of diversity in the United States has increased most in these four states

    This forum has been closed.
    Comment Sorting
    Comments
         
    by: Hovhannes from: Montevideo
    September 10, 2013 6:40 PM
    Unless India opens its economy for foreign investors, privatizes state companies and fights corruption, things will get worse, they will never improve.

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    As Refugees Perish, Greek Graveyards Filli
    X
    Hamada Elsaram
    February 11, 2016 8:01 PM
    Aid workers on the Greek island of Lesbos say they are struggling to bury the increasing number of bodies of refugees that have been recovered or washed up ashore in recent months.  The graveyards are all full, they say, yet as tens of thousands of people clamor to get out of Syria, it is clear refugees will still be coming in record numbers. For VOA, Hamada Elrasam reports from Lesbos, Greece.
    Video

    Video As Refugees Perish, Greek Graveyards Fill

    Aid workers on the Greek island of Lesbos say they are struggling to bury the increasing number of bodies of refugees that have been recovered or washed up ashore in recent months.  The graveyards are all full, they say, yet as tens of thousands of people clamor to get out of Syria, it is clear refugees will still be coming in record numbers. For VOA, Hamada Elrasam reports from Lesbos, Greece.
    Video

    Video To Fight Zika, Scientists Target Mosquitoes

    Mosquitoes strike again. The Zika virus outbreak is just the latest headline-grabbing epidemic carried by these biting pests, but researchers are fighting back with new ways to control them. VOA's Steve Baragona takes a look.
    Video

    Video Mosul Refugees Talk About Life Under IS

    A top U.S. intelligence official told Congress this week that a planned Iraqi-led operation to re-take the city of Mosul from Islamic State militants is unlikely to take place this year. IS took over the city in June 2014, and for the past year and a half, Mosul residents have been held captive under its rule. VOA's Zana Omar talked to some families who managed to escape. Bronwyn Benito narrates his report.
    Video

    Video Scientists Make Progress Toward Better Diabetes Treatment, Cure

    Scientists at two of the top U.S. universities say they have made significant advances in their quest to find a more efficient treatment for diabetes and eventually a cure. According to the International Diabetes Federation, the disease affects more than 370 million people worldwide. VOA’s George Putic reports.
    Video

    Video NATO to Target Migrant Smugglers

    NATO has announced plans to send warships to the Aegean Sea to target migrant smugglers in the alliance's most direct intervention so far since a wave of people began trying to reach European shores.
    Video

    Video Russia's Catholics, Orthodox Hopeful on Historic Pope-Patriarch Meeting

    Russia's Catholic minority has welcomed an historic first meeting Friday in Cuba between the Pope and the Patriarch of Russia's dominant Orthodox Church. The Orthodox Church split with Rome in 1054 and analysts say politics, both church and state, have been driving the relationship in the centuries since. VOA's Daniel Schearf reports from Moscow.
    Video

    Video Used Books Get a New Life on the Streets of Lagos

    Used booksellers are importing books from abroad and selling them on the streets of Africa's largest city. What‘s popular with readers may surprise you. Chris Stein reports from Lagos.
    Video

    Video After NH Primaries All Eyes on South Carolina

    After Tuesday's primary in New Hampshire, US presidential candidates swiftly turned to the next election coming up in South Carolina. The so-called “first-in-the-South” poll may help further narrow down the field of candidates. Zlatica Hoke reports.
    Video

    Video US Co-ed Selective Service Plan Stirs Controversy

    Young women may soon be required to register with the U.S. Selective Service System, the U.S. government agency charged with implementing a draft in a national emergency. Top Army and Marine Corps commanders told the Senate Armed Services Committee recently that women should register, and a bill has been introduced in Congress requiring eligible women to sign up for the military draft. The issue is stirring some controversy, as VOA’s Bernard Shusman reports from New York.
    Video

    Video Lessons Learned From Ebola Might Help Fight Zika

    Now that the Ebola epidemic has ended in West Africa, Zika has the world's focus. And, as Carol Pearson reports, health experts and governments are applying some of the lessons learned during the Ebola crisis in Africa to fight the Zika virus in Latin America and the Caribbean.
    Video

    Video Smartphone Helps Grow Vegetables

    One day, you may be using your smartphone to grow your vegetables. A Taipei-based company has developed a farm cube — a small, enclosed ecosystem designed to grow plants indoors. The environment inside is automatically adjusted by the cube, but it can also be controlled through an app. VOA's Deborah Block has more on the gardening system.
    Video

    Video Illinois Voters Have Mixed Emotions on Obama’s Return to Springfield

    On the ninth anniversary of the launch of his quest for national office, President Barack Obama returned to Springfield, Illinois, to speak to the Illinois General Assembly, where he once served as state senator. His visit was met with mixed emotions by those with a front-row seat on his journey to the White House. VOA's Kane Farabaugh reports.
    Video

    Video Exhibit Turns da Vinci’s Drawings Into Real Objects

    In addition to being a successful artist, Renaissance genius Leonardo da Vinci designed many practical machines, some of which are still in use today, although in different forms. But a number of his projects were never realized — until today. VOA’s George Putic reports.
    Video

    Video Heated Immigration Debate Limits Britain’s Refugee Response

    Compared to many other European states, Britain has agreed to accept a relatively small number of Syrian refugees. Just over a thousand have arrived so far -- and some are being resettled in remote corners of the country. Henry Ridgwell reports on why Britain’s response has lagged behind its neighbors.
    Video

    Video Russia's Car Sales Shrink Overall, But Luxury and Economy Models See Growth

    Car sales in Russia dropped by more than a third in 2015 because of the country's economic woes. But, at the extreme ends of the car market, luxury vehicles and some economy brands are actually experiencing growth. VOA's Daniel Schearf reports from Moscow.

    World Currencies

    EUR
    USD
    0.8812
    JPY
    USD
    112.18
    GBP
    USD
    0.6939
    CAD
    USD
    1.3961
    INR
    USD
    68.436

    Rates may not be current.