US consumers are caught betweenthe Scylla and Charybdis of rising commodity prices and credit crunch. The resulting recession in the US economy is sending shiversall across the globe. A terrible earthquake with a magnitude of 9 on theRichter scale would be less panicking. The effect of US debacle slowly spreads an uncertainness among other countries; worldwide. No country is immune to the effects ofthe US slowdown. 'Globalization' is the prime reason for this infection. Everycountry has now become integrated with every other country. From raw materials,to finished products, services and capital, it became possible for businessmenand manufacturers to source anything from anywhere. The term which made easy; the process of doing business has now become a bugbear.
Recession Infects the IndianTextile Industry:
Indian textile industry is integratedwith the US economy to the extent, that the effects of recession is visible inthe downstream of fabric exports due to the decreasing demand from US and Europeanmarkets. With a decrease in demand for retail garments, Indian fabricmanufacturers are restricting their production volume. Simultaneously, thisalso affects the yarn production, making it to decline. Financial turmoil inthe US is likely to have a grave influence on Indian textile manufacturers asalmost 50% of the total textile production is being exported to US and EU. Weakeningof the US dollar also foretells issues for the Indian exporters. Indian exportsector, which is already suffering from the depreciating value of dollar, willfeel the recession much more intensely.
Financial Crunch Influences CreditMarket:
Until a few months before RBIwas taking initiative to restrict the flow of money. Now with the recession, thecondition turned topsy-turvy. An unprecedented financial crisis is seen in thedomestic as well as the global markets. There is always a potential risk in theIndian credit market due to the changes in the global market conditions. Despitethe fact that Indian markets offer high returns, still industry analysts predict that there would be pressure on the capital inflows. Liquidity is getting tightaffecting the money markets since they, being interlinked with each other, theinfection spreads among them quickly. Blocked credit markets may freeze theeconomic growth of the country. Financial crisis in US is freezing the creditmarkets all across the globe; gradually. The bank is now liberalizing its banson capital inflows and is turning on the money tap. Credit crunch in US not onlyaffects the Indian exports, but also the money that is being invested in India from abroad. American companies will have less money to invest in other countriesincluding India.
Now, the concern of every countryis to ride out of the storm without much damage. When the financial conditionon a country goes down, it concurrently brings some players down with it. Intoday's tumult 'globalization' has been replaced by 'decoupling'. It is thenotion of every country to encapsulate itself and avoid being influenced by the US recession. The Government is under the responsibility of restoring theconsumer's confidence.
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