The Economy in India: Recessionary Effect

Recessionary Effect:

The economy in Indian subcontinent was booming till mid 2008. Almost all the sectors saw a high growth and market sentiments were positive. Sales of all the goods and services including luxury sectors like travel, real estate and automobile saw good times.

After mid 2008, there were crisis in the international market, which also affected India. A business report published by business standard under the title “Half of India's top firms have destroyed shareholder wealth since FY08” quoted that majority of listed companies reported a decline in their market capitalization. For most of these companies borrowings exceeded their market value resulting a wide spread debt trap. Banks had a mounting volume of bad debt and the overall sentiment of market had suffered.

In bad times such as these, consumers tend to give up their choice of luxury goods and automobile probably becomes first in the list which suffers a loss of sales volume.

Amtek Auto being the component manufacturer was affected by the slowdown in the automotive industry. The highly specialised components were now facing sluggish demands due to recession hit auto sector. There was a fall in demand volume of automobile. Bottom lines of the automobile manufacturers and subsequently auto component manufacturer were adversely affected because of lower volume of automobile manufacturer. The hit on other sectors like infrastructure and mining had also resulted a fall in the Commercial Vehicle segment.

In the given situation, where the entire world and India was affected by recession effect, Amtek, with a view to go into greenfield project, was trying to see all the dimension of the possibilities which either can favour or prevent it’s goal to be materialised...

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...t support the business houses, with the fear of losing their interest.

4. Legal:

Farming and forest land were still permitted to be acquired at a higher price, but acquisition or leasing or even renting of tribal lands were not permitted by the land. States like Orissa and Jharkhand had majority of land owned by tribes.

Even if a patch of land was owned by a tribal person, in a big cluster of non tribal land, it became difficult for establishment of industries. Discreet availability of land did not facilitate setting up of steel plants, as they were spread across multi thousands of acres.

The above factors made the Greenfield projects of steel sector unviable. Not only Amtek suffered from above mention socio economic and socio political issues, but almost entire steel industry suffered the loss. There was very little progress in the industrial development.