The Financial Year of 2008-09 has been an exceptionally challenging one
across the global economy. What started off as turmoil in the financial
sector of the advanced economies has snowballed into the deepest and
most widespread financial and economic crisis of the last 60 years.
With all the advanced economies in a synchronised recession, global GDP
is projected to contract for the first time since the World War II,
anywhere between 0.5 - 1 percent (As per March 2009 forecast of the
International Monetary Fund. The World Trade Organisation has forecast
that global trade volume will contract by 9 per cent in 2009.
The Governments and Central Banks around the world have responded to
the crisis through both conventional and unconventional fiscal and
monetary measures. Initiatives to stanch the bleeding include public
capital injections, an array of liquidity facilities, monetary easing
and fiscal stimulus packages. At the same time, there is continued
debate on the adequacy of the fiscal stimulus packages across
countries, and their effectiveness in arresting the downturn, reversing
job losses and reviving consumer confidence. At the recent meeting in
early April 2009, the G20 leaders collectively committed to take
decisive, coordinated and comprehensive actions to revive growth,
restore stability of the financial system, restart the impaired credit
markets and rebuild confidence in financial markets and institutions.
The acute degree of stress in mature markets and its concentration in
the banking system has impacted the capital flows to emerging
economies. The flight to safety of the capital and return of home bias
has had major impact on the worlds major currencies. Since September
2008, the US Dollar, Euro and Yen have all strengthened in real
effective terms. The Chinese Yuan and currencies pegged to the USD
(includin those in the Middle East) have also appreciated. Like all
emerging economies, India too has been impacted by the crisis. The
extent of impact has caused dismay, mainly on two grounds: first,
because our financial sector remains healthy, has had no direct
exposure to tainted assets and its off-balance sheet activities have
been limited; and second, because Indias merchandise exports, at less
than 15 percent of GDP, are relatively modest. Despite the adverse
impact, there are several comforting factors that have helped to India
1. Our financial markets, (Banks particularly), have continued to
2. Indias comfortable foreign exchange reserves provide
confidence in ourability to manage our balance of payments
notwithstanding lower export demand and dampened capital flows
3. Headline inflation, as measured by the wholesale price index, has
declined sharply. Consumer price inflation too has begun to moderate.
4. Because of mandated agricultural lending and social safety-net
programmes, rural demand continues to be robust.
The growth rate of Indian economy has slowed down to 6.7 percent for
2008-09 against 9 percent in 2007-08. India is back in the
trillion-dollar economy club, thanks to the GDP growth and the recent
rise in the value of rupee against that of dollar. This may be an
indication that the economic slowdown may be less harsh in the coming
months ard there may be a beginning of upturn. The Rs.3,00,000 crore
stimulus package, the loan waiver of Rs.70,000 crore for the farmers, a
raise in the salaries of government officials, and the development work
on National Rural Employment Scheme have helped the cause of the GDP
growth. An increase in the growth of consumption by the government has
also contributed to the growth rate.
The FY 2008-09 has been a year of dampened sentiments and demand, which
has dented corporate margins while the uncertainty surrounding the
crisis has affected business confidence. Risinc economic slack has
contained wage increases and eroded profit margins. Investment demand
has also decelerated. The demand for working capital finance during
January-March 2009 from external sources has dropped due to slowdown in
business, decline in commodity prices and drawdown of inventories, even
as the availability of finance eased.
The effects of the worldwide recession, dampened sentiments and demand,
had major impact on the Indian Textile Industry. The textile exports
from India were drastically reduced, which affected your Company as
well, as exports had been \ accounting for around 50 percent of the
revenues in the past few years. Inspite of that your Company was able
to sell its production in the I Domestic markets but at far lower
realisation. j Consequently, your Companys financial; performance
suffered during the year. The details are given in the chapter on
Management Discussion and Analysis, including what RSWMs Management
proposed to do to lift its performance in 2009-10.
Going forward, we hope that bold policy implementation that are able to
convince markets of decisive handling of the financial strains can
revive confidence and spending commitments. Still even with strong
efforts by policymakers, financial market will take time to stabilize.
Financial strains in the mature markets are projected to remain heavy
until well into 2010. Emerging and developing countries are expected
to face curtailed access to external financing in 2009 and 2010. Fiscal
deficits are expected to widen sharply in both advanced and emerging
economies, as governments are assumed to implement fiscal stimulus
plans in G20 countries amounting to 2 percent of GDP in 2009 and 1.5
percent in 2010.
In this era of exceptional uncertainty, there is a need to pool in all
the resources at disposal and at the same time conserve resources at
hand. I am sure the Management will rise to the occasion and deliver.
With best wishes.