THE GLOBAL recession is perhaps, the most used, or rather misused word today, being quoted by everyone from semi-literate laymen to the ‘hyper-literate’ pundits of the financial world alike. There is no dearth of theories, explanations, figures of losses, forecasts for short and long durations, advices, fears, hopes, bail-out packages, job cuts; anything we could think of that is even remotely connected with the recession. The point here is not the technical details, figures or analyses of the situation; they are plenty everywhere. It is the spirit of India and its instinct for survival in this scenario that is the subject.

To start with, the present recession can be considered a classic example of what is known as the ‘butterfly effect’*, or ‘domino effect’**. Briefly saying, the origin of this crisis lies in the greed of realtors in USA who started sub-prime lending, ie, lending to the borrowers with dubious capabilities of repayments, who then resorted to sub-lending the loans. This chain ultimately leads to gigantic bad debts and swallowed the multi-billion dollar US housing-finance giants like Freddie Mac and Fannie Mae. Their collapse in turn triggered fall of other big investors who suffered losses in real estate investments, finally causing a panic in the financial markets, resulting in heavy selling and pull out of money and consequential free fall of share indices. The reaction grew only worse and spread to other parts of the world. The end result was free fall of global markets, shrinking or total collapse of many a business entities and massive job-cuts all over the world.

While there have been doomsday predictions everywhere equating the present crisis with the worst ones in the history. Comparatively India has managed and fared well, so far. That India is insulated from the global crisis is nobody’s case. There have been visible effects of the global slowdown. But certainly the effect here is much less than the macabre scenario of financial markets that is projected in the more developed nations. The fall in the GDP growth rate and loss of jobs has not been as heavy as was initially feared, although the share market indices have since fallen steeply. In some cases, there have even been pretty good fresh investments and job-inductions.

When the USA and Europe look frightened of the future, an average Indian does not seem to be so badly hit. Things are still moving, albeit at a slower rate. The reason is not far to seek. Indians are known the world over for their perseverance and capability to adapt. Another factor is the Indians’ somewhat emotional and social approach in every sphere of life, business included. This explains our way of dealing with the present crisis, with far less lay-offs than anywhere else.

But the least noticed fact is that in our country a major part of population is, in fact, not involved in investments in share markets, realty or other such financial activities, but is still largely dependent upon the informal trading at local level, say in the small time markets near the living places for daily needs -- local fruit, vegetable or grocery shop, milk vendor, domestic and other personal services etc, due to lower earning and living standards, and partly because of a conservative approach towards money. These are market systems which are somewhat insulated from the large scale formal financial network of national level, which is affected harder by the global crisis. It is this second level informal social trading system which is still holding strong like a steel framework that keeps us going even in face of the worst global financial crisis.

* Metaphorically, a butterfly fluttering its wing in one part of the world could possibly trigger a hurricane in another part of the world.

** One event triggers a spate of similar events that propagates like a wave going long distances.