Thursday, December 18, 2008

Recession, Jobs and Chindia!

People say that there are rays of hope in China and India-the developing nations. What people fail to understand is that speed at which clouds of economic gloom and despair have gathered over China and India has been startling. Until quite recently these two countries were thought to be insulated from the contagion afflicting the developed nations. On the contrary these nations are already beginning to see the pain. China whose GDP was growing at 9.5% over the last decade mainly due to the growth exports to US, suddenly finds no takers in its major end market. While the Chinese government is trying to increase the local spending, it could no where compensate for the US loss. 

Even if  China grows at the rate of 7.5% this year, the impact 2.5% reduction in Chinese GDP would create is huge – millions of job losses. This inturn would slowdown the Chinese GDP further. IMF predicts that if GDP of China slows down to 7%, then the world would take longer time to recover. Couple this with the second major market India. The impact is likely to get worse. Thus, in the best interests of everyone, it is essential to bring back China and India to normal rates soon.

Most of my friends in B-Schools would agree with me on this – this is the worst year to pass out of school, especially with a MBA. The world’s largest economy, US and the immediate next, Europe have already gone into recession. Jobs are hard to come by. Infact there are no jobs. Students who came with the big American and European dreams are finding their dreams shattering like a card house. Looks like the Obama promise of 3million green jobs could nowhere instill the required faith and confidence. The only advice would be to keep the fingers crossed and hope for a change in the mind of the US consumers. Let them consume more. After all  only if US consumes, the rest of the world will survive. :)

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