The country is currently facing an economic crisis. It has seen the lowest GDP growth in last 25 quarters at 5%. Many economists and experts have their comments in this regard.
Raghuram Rajan, an internationally renowned economist & Former RBI Governor expressed his concern on the condition of Indian economy stating “Certainly, the slowdown in the economy is very worrisome.” He also told about how Harvard Research Paper tells about India’s GDP growth figures have been over-rated for 9 years. The paper tells that India’s GDP growth rates have been over-rated by around 2.5% per year since 2011. It means that the government claimed GDP growth figures of 6.8% were in real 4% only. The paper was published by none other than Arvind Subramanian who was Chief Economic Adviser for the Indian Government.
Amidst this plunging economy and escalating inflation, we need to find appropriate solutions for our wealth to be invested properly for a stable income. Hence, here are some suggestions to secure our wealth with healthy investment options while keeping the expenditure low.
1. Invest in Stocks
During the state of escalating inflation and rising recessions, stock market figures likely start to depict low figures. If you have invested your money in Mutual Funds and SIPs, then there is a good chance that you might have been seeing an alarming decline in your investment values.
People generally end up enacting withdrawal of money from stock markets and start investing in more secure investments such as banks fixed deposits, government bonds, public provident funds etc.
Although, to the contrary, as described by MD for Morgan Stanley India, Mr Ridham Desai & Founder of PlanRupee Investment Services Mr Amol Joshi, recessions have been considered as the more rewarding situation for stock investors. Reason being, the stock prices face a serious low during economic slowdowns. Some stocks even face the lowest price in their life on the stock exchange. This is the best time to purchase as many units as you can because potential stocks will start to perform well as soon as the country moves out of recession. That time, the stocks will reap inestimable benefits to the holder.
However, these types of investment ideas are better off for the players who have patience and money to keep it invested for a good period. Further, before choosing to make bulk purchases in particular stock, one must get expert knowledge regarding whether the stock’s parent company has the potential to survive the recession and then make a boost again in the time of recovery.
Hence, if you are looking for short term benefits, it’s better to stick with liquid funds which are less affected by stormy market conditions.
2. Emergency Funds
During the recession, people ought to get laid off from their job. It is a very common practice as the employers aim to cut-off their operating expenditure to survive the recession and they choose to do so by firing their employees. You need to be important to the company if you wish to hold your job.
In case, you are even a little under-confident with your job-security, then create an emergency fund. This fund will help you survive your expenditure in the worst-case scenario. As per the experts from personal finance 101, it is good to maintain an emergency fund for at least six months worth of expenses by saving from your regular income.
The fund will help you buffer your expenditure while you hunt for the new employment. As suggested by Vishal Dhawan, CEO of PlanAhead Wealth Advisors, emergency funds for up to 6 months can be created in a combination of ultra-short-term debt funds and Flexi-fixed deposits. Further, for emergency funds for beyond six months, short-term debt mutual funds prove better.
3. Don’t be a Quick Job-Swapper
In recent years, many companies have established their businesses. However, these companies fail to cross even their startup phases. These companies offer great recruitment opportunities but they are the first ones to fall for bad decision making and poor managerial skills of the managers.
The employers fail to fulfil their bottom lines while trying to secure a customer base during economic breakdowns. Hence, before you choose to switch jobs during the recession period, do proper home-work. Gather information about the prospective employer, most specifically in terms of their financial performances over the past few periods. Rarely any small entity is able to survive the hampering recession and only big players are able to make it through while maintaining a basic growth.
Also, watch for the company’s financial health keeping an eye on economic factors. Delayed salary payments to employees, mergers and takeovers of divisions and segments, budget cutbacks are some of the major indicators of a poor economic condition of the firm.
These are some of the best ways in which you can fight the recession in a well-prepared manner.
What Former PM cum Finance Expert has to say about Inflation?
Further, Former Indian Prime Minister and the famous Economist, Dr Manmohan Singh said “The state of the economy today is deeply worrying. The last quarter’s GDP growth rate of 5% signals that we are amid a prolonged slowdown. India has the potential to grow at a much faster rate but all-round mismanagement by the Modi government has resulted in this slowdown.”
A long statement has been issued by Times of India where Dr Manmohan Singh has shown his concerns on the state of the economy of India. He is the guy who saved the country from the recession with his innovative economic policies from 1991 to 1994. His opinion about the slowdown in the growth of GDP of Country for the quarter is clear signs that India is on the verge of facing a prolonged economic slowdown.
But who is to be blamed for the slower economic growth. Well, for one reason, issues like global trade conflicts and government’s unfriendly investment policies have resulted in a decline in foreign investment. This has happened for the 1st time over 6 years.
Not only this, if we look upon the domestic industry, the private sector expenditure rate has declined and people are spending money on essential things only such as housing, healthcare and food. Medium and small scale industries are also cutting down their expenditures and major expenses are only done by large-scale corporations.
The automobile industry is also facing a serious economic crisis. It has become difficult for the automobile players to keep up with expenditures related or wages, may it be rural or corporate. This is the situation as described by SBI Ecowrap report (Issue 32).
Current Finance Minister’s Response
These are the clear evidence that proves that we may soon face a recession. As soon as the recession hits the country then Jobs and employments are the first ones to hit as the employers and the organizations starts to focus on cutting down their operating costs. This will generate a lot of income-related issued for the people.
However, the union government is not involving in the discussion agenda. On being asked to showcase views on Manmohan Singh’s statement, current finance minister Nirmala Sitharaman said “Is Dr Manmohan Singh saying that instead of indulging in political vendetta they should consult sane voices? Has he said that? All right, thank you, I will take his statement on it. That is my answer.”
She further added “I have no thoughts on what he said. He said it and I listened to it.”
Rather she is focused on introducing a stimulus package for the economy. The package is aimed to stabilise several sectors (especially auto) and encourage foreign direct investment by removing surcharges.
Amidst the growing tension regarding the economic crisis and the recession in the country, it is hard to understand whether the current government policies will be able to help country survive through economically. In the year 1991, the country faced a similar situation where the government had run out of funds and was left with merely 6 months of operating capital. However, it was the economic policies of the then Finance Minister Dr Manmohan Singh which saved the country from falling into the hands of recession.
If the country is on the verge of facing yet another recession, then we will need unforeseen economic reforms at national level to change financial fate of India.