Warning: Turbulence in the Air and Crashes on the Ground
This post was written before Dewali Festival which was celebrated on 28th October.
True to the title, there is a huge turbulence in the Indian airline industry what with Jet Airways laying-off 1900 workers although it had to re-instate 800 of them after huge pressure was applied by none other than Mumbai politician Raj Thackerey. Serving termination notice to many workers at a time is not very common in India – but Jet Airways had to do the unthinkable to save itself by reducing operational cost soon after it tied-up with another private play Kingfisher Airlines. Most of those workers are probationers and include flight attendants, pilots and ground staffs. Jet announced that due to the rising fuel cost and dwindling passengers, the amount of loss was ever increasing. So they had to lay off the surplus staff hired for expansion plan they undertook in the past. This is not only the case of Jet Airways. Other airlines too are facing similar problems. The government though is not sitting idle and made an announcement that would definitely help private players. According to a recent move by the government, airlines could pay the bulging fuel bill (that stands around Rs. 160 billion) in phased manner so that they get some breathing space.
On the other hand the Prime Minister of India Mr. Manmohan Singh had to address the parliament to re-assure the growing public worries caused by liquidity crisis in the financial sector worldwide. The PM assured the nation that Indian banking and insurance sector will not face similar turmoil like others as they are on more sound footing and not dependant on international market. He assured the people that all their deposits are safe and will remain safe. He also warned the industry about the imminent slowdown of the economy during this financial year but assured that Indian economy will still grow at more than 7 percent and remains one of the fastest growing economies in the world. The over-all foundations of the economy remain sound despite stock market crash and slowing industrial output. Economic experts have welcomed this honest move by the PM and predict the slowdown is temporary and growth will again pick-up by net year.
There is not so much great news from the stock market as it is more integrated to the world economy than the banking sector. The Bombay Stock Exchange Index (Sensex) has crashed below the psychological mark of 10,000 on the face of Foreign Institutional Investors (FIIs) loosing their confidence in the Indian market and withdrawing their funds. The market has been seeing more selling than buying during last couple of weeks. But a recent warning by Securities and Exchange board of India (SEBI) – the market regulator to FIIs who have been lending shares to equities outside the country has forced them to follow the rules and recover the market somewhat.
So, it is a mixed bag for India – while the insurance, mutual fund and financial market is still intact, the stock market has felt the pinch of an international crisis. While the economy is showing signs of slowdown, export market is buoyant. Domestic consumption is also good due to the festive season. Still coming days will be very intriguing and interesting because nothing can be said for sure – as they say – “Anything May Happen”.