A

STUDY ON

IMPACT OF

INDIAN HANICRAFT
EXPORT

1
EXECUTIVE SUMMERY

2
 EXECUTIVE SUMMERY

Unemployment, Financial crises are the major issues for every body. These days people
are frequently going through the words like Global economic meltdown, International
financial slowdown, Recession etc. Many of the people are highly affected by the results
of all these. This fire dragon is burning everything by throwing the fire all around. These
resulting drastic changes in lifestyle of many in score of ways.

Currently we are going frequently through the sentences telling the peril effects of this
global economic slowdown on numerous company employers of various sectors. This
downturn, of course left negative marks on business too. Many businesses are going
through and facing effects of this economic evil, commonly named as ‘Global
Meltdown’. The effect of this slowdown on business sector is resulting directly in a
negative way on its various phases including export-import sector, which is one of the
crucial parts of any kind of business.

Regarding this, the report of Federation of Indian Export Organisation (Fieo) tells that the
manufacturing Industries here, have recorded steepest decline in the sector of export-
import. This proved correct when we take a look of exports done in some industries. This
reveals that the handicraft export stepped down by 54 per cent in December 2008 as
compared to that in December 2007. While Gems& Jewelry, one of the segments most
affected by economic slowdown and the textile industries are contracted by 27 & 21 per
cent respectively. This gives us broader idea about the effects of economic meltdown on
export-import trade.

While talking about the worldwide export-import trade in the current scenario of
meltdown, ‘The exporters need to diversify to Asia & Africa to escape from the recession
in traditional markets in the west’ – are the words of Director-General of Research and
information systems for developing countries. This reveals that exporting goods or
products from Asian & African countries could be proved as the helping hand for getting
free from the recession in western traditional markets to some extent. This obviously is

3
excellent for the countries in Asia & Africa, which in tern is the chance for them to
broaden their horizons in the export sector.

Among all the Asian countries if we talk particularly about India then according to the
Union Commerce Secretary, Mr. Pillai, India’s export performance is much better as
compared to the rest of Asian countries. The two countries with major economies have
released their January export figures, which are extremely lower than those of India.
‘Vietnam’, which is one of the countries having major economies has a negative growth
rate of 24.2 per cent and ‘South Korea’, another country having major economies has 32
per cent of negative growth rate. While in case of India, in October the merchandise
exports were decline by 12.1 per cent which was improved to 9.9 per cent in November
and just dropped down by 1.1 per cent in December. This shows India’s excellent export
performance in comparison with other Asian countries.

At here, the government needs to pay the crucial role by taking some major steps. It
needs to provide some social security to the retrenched workers in the export sector, as
exporters were loosing out because competing countries like China, which referred as a
global export powerhouse. China had provided additional concession to their exporters,
which has had beneficial for them to price their products more competitively.

Government needs to fulfill the demands of global exporters. It should continue the
stimulus packages to boost the economy in the year 2009-10, for getting rid of global
slowdown. During the coming fiscal the public expenditure needs to be stepped up to
counter the slowdown.

4
 INTRODUCTION

TO

INDIANHANDICRAFT

5
 INTRODUCTION TO THE INDIANHANDICRFT

India is one of the important suppliers of handicrafts to the world market. The Indian
handicrafts industry is highly labour intensive cottage based industry and decentralized,
being spread all over the country in rural and urban areas. Numerous artisans are
engaged in crafts work on part-time basis. The industry provides employment to over six
million artisans (including those in carpet trade), which include a large number of women
and people belonging to the weaker sections of the society.

In addition to the high potential for employment, the sector is economically important
from the point of low capital investment, high ratio of value addition, and high potential
for export and foreign exchange earnings for the country. The export earnings from
Indian handicrafts industry for the period 1998-99 amounted to US$ 1.2 billion.

Although exports of handicrafts appear to be sizeable, India’s share in world imports is

miniscule. It is a sector that is still not completely explored from the point of view of
hidden potential areas. India, a country with 26 states and 18 languages and more than
1500 dialects offers an enormous range of handicrafts from each of the states. Major
centres in Uttar Pradesh are Moradabad also known as the "Peetalnagari" (City of
Brass), Saharanpur for its wooden articles, Ferozabad for Glass. The North Western
state of Rajasthan has to offer the famous Jaipuri quilts, Bagru and Sanganer printed
textiles and wooden and wrought iron furniture from Jodhpur. The coastal state of
Gujarat comes with embroidered articles from Kutch. Narsapur in Andhra Pradesh is
famous for its Lace and Lace goods. But this is only a small part of the total product
range. India offers much more.

Handicrafts are classified into two categories:

1. Articles of everyday use

2. Decorative items

6
The craftsmen use different media to express their originality. The diversity of the
handicrafts is expressed on textiles, metals – precious and semi-precious, wood, precious
and semi-precious stones, ceramic and glass.

Textile based handicrafts:

Hand printed textiles including block and screen printing, batik, kalamkari (hand printing
by pen) and bandhani (tie and die) are used in products ranging from bed-covers to
sheets, dress material to upholstery and tapestry. The famous embroidered articles of silk
and cotton, often embellished with mirrors, shells, beads, and metallic pieces are also
found in India. Embroidery is done too on leather, felt and velvet etc. This segment of
the industry accounts for almost half a million strong employment in addition to a large
number of designers, block makers, weavers and packers involved in the trade.

Clay, Metal and Jewellery:

Brass, copper, bronze, bell metal are used for a variety of wares and in a variety of
finishes. Scintillating ornaments are available in a wide range of patterns, styles and
compositions. Made from precious metals, base metals, precious and semi-precious
stones; these ornaments have traditional as well as modern styles.

Woodwork:

Wooden articles in India range from the ornately carved to the absolutely simple. One
can find toys, furniture, decorative articles, etc. bearing the art and individuality of the
craftsman. India is known particularly for its lacquered wood articles.

Stone Craft:

The intricately carved stoneware made of marble, alabaster or soapstone, etc., inlaid with
semiprecious stones carry on the heritage of Indian stone crafts.

7
Glass and Ceramic:

Glass and ceramic products are a fast upcoming segment in the handicrafts from India.
The age-old production process of mouth-blowing the glass instills a nostalgic feeling.
The varied shapes of ceramic and glass in a number of colours, would appeal to Western
aesthetics while retaining the Indian touch.

Craft concentration Areas:

A wide range of handicrafts are produced all over Indian artmetalware / EPNS ware,
wood carvings and other wooden artwares, imitation jewellery, handprinted textiles,
shawls as artwares, embroidered goods, lace and lace goods, toys, dolls, crafts made of
leather, lacquerware, marble crafts etc. Although it is difficult to limit a specific place for
the particular craft, the following places are listed for their particular crafts.

Art metal ware Moradabad, Sambhal, Aligarh, Jodhpur, Jaipur, Delhi, Rewari,
Thanjavur, Madras, Mandap, Beedar, Kerala & Jagadhari,
Jaselmer
Wooden Art wares Saharanpur, Nagina, Hoshiarpor, Srinagar, Amritsar, Jaipur,
Jodhpur, Jagdalpur, Bangalore, Mysore, Chennapatna, Madras,
Kerala & Behrampur (WB)
Hand printed Textiles & Amroha, Jodhpur, Jaipur, Farrukhabad, Sagru & Sanganer
Scarves
Embroidered goods Kutch (Gujarat), Jaisaimer, Baroda, Lucknow, Jodhpur, Agra,
Amritsar, Kullu, Dharmshala / Chamba & Srinagar
Marble & Soft Stone Agra, Madras, Baster, Jodhpur
Crafts
Papier Mache Crafts Kashmir, Jaipur
Terracotta Agra, Madras, Baster, Jodhpur
Zari & Zari Goods Rajasthan, Madras, Baster
Imitation Jewellery: Delhi, Moradabad, Sambhal, Jaipur, Kohima (Tribal)
Artistic Leather Goods lndore, Kolhapur, Shanti Niketan (WB)

Selected crafts pockets for achieving export goal:

8
Although each crafts pockets has its particular problems, a few selected craft pockets are
identified based on their past performance for immediate remedial attention to stimulate a
quantum in exports of handicrafts in the coming years.

Moradabad(UP) For Artmetalwares and imitation jewellery

Saharanpur (UP) For Wooden handicrafts & Wrought iron handicrafts
Jodhpur (Raj.) For Wooden, Wrought Iron and Sea Shell handicrafts
Narsapur (A.P.) For Lace and Lace goods

COUNTRY-WISE EXPORTS OF HANDICRAFTS

The major buyers for handicrafts (other than carpets) are as under:

Art Metalwares U.S.A., Germany, U.K. & Italy

Wood Wares U.S.A., U.K., Germany & France
Hand Printed & Textiles U.S.A., U.K. , Germany & Canada
& Scarves
Embroidered & U.S.A., Saudi Arabia, U.K., Germany
Crochetted Goods
Shawls as Artwares Saudi Arabia, U.S.A. Japan & U.K
Zari & Zari goods U.K. U.S.A., Japan & Saudi Arabia
Imitation Jewellery U.S.A., U.K., Saudi Arabia & Germany
Miscellaneous U.S.A., Germany, U.K. & France
Handicrafts

9
 M a jo r D e s t in a t io n s f o r In d ia n H a n d ic r a f t s
( % s h a r1e 9i 9n 8 - 9 9 )

U .S .A . U .K .
31% 11%
S w it z e r la n d
1% O th e r s
22%

S a u d i A r a b ia A u s tr a lia
2% 2%
Canada
N e t h e r la n d sJ a p a nIta ly G e r m a n yF r a n c e 4 %
3% 4% 4% 11% 5%

Value Adding Chain in Handicrafts

Identification of market opportunities

Prototype design and development / adaption and refinement
Test marketing
Upgrading equipping facilities
Securing inputs
Entrepreneurial hiring, training, managing
Production, quality control and packaging
Costing and pricing
Physical distribution
Export market development

In the changing world scenario, craft products exported to various countries form a part
of lifestyle products in international market. The impact is due to the changing consumer
taste and trends. In view of this it is high time that the Indian handicraft industry went
into the details of changing designs, patterns, product development, requisite change in
production facilities for a variety of materials, production techniques, and related
expertise to achieve a leadership position in the fast growing competitiveness with other
countries.

10
 The 6 million craft persons who are the backbones of Indian Handicraft Industry as
provided with inherent skill, technique, traditional craftsmanship but that is quite
sufficient for primary platform. However, in changing world market these craft persons
need an institutional support, at their places i.e. craft pockets for value addition and for
the edge with other competitors like China, Korea, Thailand etc.

Countrywise Export of Handicrafts

1800
1642
1600
1440
1400
1139
1200
Rs. in Crores

954
1000 1997-98
800 1998-99
536 539
600 466 453
400 195
205 190
235 164 117 135 122
200 151 177 171
69 79 108 57 68
0
da

n
y

nd
ce

s
.
ly
lia

K
an

pa

.A
nd

bi

er
Ita
an
na

U.
la
ra

ra

th
m

Ja

la

er
st

U.
Fr
Ca

iA

O
er
er
Au

it z
th
G

ud

Sw
Ne

Sa

The German handicrafts and Giftware Market

With over 82 million inhabitants, Germany is the largest market for giftware and
handicrafts items in Europe. A member of and situated within the European Union,
Germany is supplied with giftware and handicrafts from Germany as well as the
surrounding European countries such as France, Italy, Switzerland and the United
Kingdom and from all other parts of the world: Russia, Latin America, Africa and Asia.

The size of the total German giftware and handicrafts market varies according to the
definition of giftware and handicrafts. With its present size around DM 29.5 billion it

11
corresponds to a broad definition of giftware and handicrafts that includes the following
items: home furnishings, artmetalware, table accessories, Christmas decoration,
woodware and furniture, imitation jewellers, artificial flowers/plants, scents/cosmetics,
sweets, toys/computer games, books, discs/videos, watches/jewellery, certain
apparel/textile items and others. The German giftware and handicrafts market grew from
DM 29.1 billion in 1998 to DM 29.5 billion in 1999, but experienced a slight decline in
the first quarter of 2000.

The substantial supply of giftware and handicrafts has transformed the German giftware
and handicrafts market into a fiercely price-competitive market place. Nevertheless,
innovative and new to market giftware and handicrafts items place still have good market
prospects. It is essential for the German giftware and handicrafts marketers to find new
products to stay competitive. Although German consumers may be willing to pay a high
price for exclusive items they are very price conscious and want value for money. Among
traditional gift items, candles, festive items, including Christmas decoration, exclusive
gift boxes and gift-wrap, ribbons, nostalgic calendars and all types of scented items have
best prospects. The German market shows a strong demand for low-priced candles. Thus
imports from Poland and China have increased substantially. The average growth for the
overall giftware and handicrafts is estimated at 1-2 percent over 1999-2000.

Competitive Situation

German giftware and handicrafts consumption is growing more or less in line with the
relatively slow growth rate of income during the last years. Thus, expectations for
additional growth are not very high. Annual growth rates of between 1.5-2 percent are
forecast for the next few years for the overall giftware and handicrafts market. In general
the market shows good business opportunities if prices and quality are competitive and
delivery schedules are fulfilled.

Apart from its own producers, Germany is supplied by giftware and handicrafts from
nearly all of the European countries. German firms often import specific product groups
from a particular country. Major suppliers of pottery are, for example, Spain and

12
Portugal; fine exclusive stationery comes from Italy, France and Switzerland; candles
from Poland, China and Portugal; dried flowers from the Netherlands etc.

Fierce price competition in Germany is intensified by the increasing quantity of Chinese

and Asian made products on the market. For India this situation coupled with the
relatively strong Indian rupee which means that firms proving to be most successful in
the recent past have offered niche market giftware and handicrafts, i.e., exclusive to
Indian handicrafts items or new-to-market products.

A few well-established German manufacturers of giftware and

handicrafts items are:

Koziol GmbH, Erbach Krebs-Glas-Lauscha GmbH, Ernstthal

Barti GmbH, Garching Margarete Steiff GmbH, Giengen
Duni GmbH & Co. KG, Bramsche WMF AG, Geislingen
Rastal, Hoehr-Grenzhausen Rosenthal AG, Seib
Fartak, Lahr W. Goebel Porzellanfabrik, Roedental
GIES Kerzen, Glinde Walther-Glas GmbH, Bad Driburg
Jet Papier GmbH, Bernau

Sales volume of specific sub-sectors (estimates):

Some estimates of individual giftware and handicrafts subsector volume sales are
provided as follows:

Seasonal: Market insiders estimate the total volume of the seasonal items market,
including Christmas, Easter, Valentines Day and the German counterpart of
Thanksgiving, at DM 7.7 billion. In 1997, about DM 3 billion were spent alone for
Christmas decoration, Christmas floristic items and Christmas trees only. Christmas items
are usually imported from China, Taiwan, Thailand, Philippines and India. However,
Indian Christmas decorations as candle stands or Christmas tree hangings and soft toys
find a ready market in Germany if they are moderately priced.

Hobby and art supplies: The present market volume of hobby and art supplies in
Germany is estimated at about DM 3 billion, while the total European market should

13
amount to DM 12 billion. Insiders believe that this specific market segment still offers
some potential for new products. A recent survey shows that apart from their school days,
most of the Germans who do regular DIY or hobby work are between 60 and 69 years
(10.8 percent of the German adults) old. With the fast ageing of the German population a
stronger demand for hobby and crafts is likely.

Incentive items: From 1992 to 1998, the total German market for incentives increased
from nearly DM 3 billion to DM 6 billion.

Toys: In 1998, annual sales of licensing products amounted to about US$ 4.2 billion in
Germany. Also in 1998, the toys market volume expanded to DM 6 billion. Total annual
sales for computer games and learning games alone, increased to DM 2 billion in 1998
compared to the pre-year level of DM 1.7 billion.

Market Access

EU member states and Asian countries, China and India in particular, are major suppliers
of giftware and handicrafts to the German market. Indian firms making a first approach
to the German market are advised to have comprehensive product literature and data
sheets professionally translated into German. Although English is widely understood, a
well-prepared translation gives an important marketing edge, particularly in the initial
presentation. Indian firms should preferably appoint an agent or distributor who can
maintain a stock sufficient to answer short-notice orders.

14
Customs Duties

Customs duties vary according to material and product. Though duties are high for a few
items, i.e., dried flowers, potpourri (16.7-20 percent), T-shirts (12.0-13.2) and hand-
woven, woollen blankets (13.4 percent), the majority of customs duty rates falls in the
range of 5-8 percent. For example:

Customs Duties (in percent)

Ceramics 4.1 - 7.5

Toys 5.6 - 6.3
Stationery 8.4
Plush animals 6.0
Quilts/blankets 7.5
Candles 2.8
Silver jewellery 2.5

In addition, there is a 16 percent sales tax, which is eventually passed on to the consumer
in form of the value-added tax (VAT). But the VAT has to be paid when entering the
German market by the exporter/German importer.

Items that originate from certain animal species, i.e., snakeskin or hides of some animal,
it must be ensured that the export of these products complies with the Convention on
Endangered Species (CITES). Regarding sample orders, exporters should be aware that
one sample with a maximum value of DM 50 each or, five identical samples of one
product group not exceeding a total value of DM 50, are usually customs free.

Product Standards

In view of the wide field of products that could be considered as giftware and handicrafts,
it is difficult to name standards. Compliance with EU standards and regulations is
strongly suggested. There are, however, only few product groups in the giftware and
handicrafts field that have to follow standards. It is essential that CE-labelling be
observed where required. The CE-mark (including conformity statement and technical
documentation) is mainly required for toys (88/378/EEC standard). While the quality

15
regulations for candles are obligatory assuring a certain level of quality, the toy
regulation and the electronic standards have to be observed because of safety
considerations:

Major Distribution Channels

In Germany, giftware and handicrafts is distributed through five major channels:

Wholesalers

• Importers/distributors
• Commission agents/sales representatives
• Department stores
• Mail-order
• Internet sales
• Tele-shopping

The individual channels are described in detail in the following.

Wholesalers:

Besides offering wide range of goods to retailers for direct sales, this channel also
supplies large quantities of individual articles. They are very particular in maintaining
consistency in the kind of products and their quality. One of the distinguishing features
of wholesalers is to provide distribution and storage facilities. Specialised wholesalers
deal in sales to retailers as well as to final consumers. They maintain high quality
standards and but have a narrower and in-depth range of arts and crafts.

Importers / distributors:

Most Indian giftware and handicrafts companies use importers/distributors to market and
sell their giftware and handicrafts lines. They buy and sell on their own account. Thus,
the companies take advantage of the distributor's expertise, his sales force and his
existing distribution channels. Distributors call on giftware and handicrafts retailers,

16
purchasing groups and supermarkets. The distributors' mark-up varies depending on the
giftware and handicrafts item, but at least 50 percent. While the mark-ups vary according
to the distributor; they usually also depend on the exclusivity of a product and on its
competitiveness in the overall giftware and handicrafts market.

Germany hosts more than 45,000 giftware and handicrafts retailers. Several retailers
import directly from the United States and sell to the German customer. Usually these are
small companies looking for items new to the market and handling small orders only.

Commission agents:

Commission agents provide Indian companies with direct access to the German market
and direct control. Independent commercial agents are normally working on a 15 percent
commission and operate on a regional basis. They concentrate on specialist retailers,
purchasing groups and department stores. Commission agent contracts are based on
stringent EU and German regulations. An Indian firm wishing to appoint an agent should
make sure that such standard contracts meet its expectations. In order to facilitate market
entry efforts by the agents their initial commission is often a few percent higher than the
"usual" commission. These additional payments are to reimburse the agent for substantial
advertising and any special efforts facilitating the new product's market entry.

Department Stores:

Indian companies interested in establishing business contacts with major department

stores, mail-order houses and retailers may also choose the direct approach. Department
stores in particular, prefer to deal directly with manufacturers. Their buyers are very
specialized and only handle a limited range of products. At some occasions department
stores also buy through independent commercial agents. Quite often they have their own
buyers as well as a few agents that usually work with them and who know their
assortments. If a department store decides to import a particular giftware and handicrafts
item, it places bulk rather than small orders.

Mail Order:

17
On an average, each German consumer buys products totaling to DM 500 each year from
mail-order houses. There are about 200 mail order companies in Germany. In Europe,
Germany is the largest mail order market, followed by Great Britain and France. The
total European market volume for mail order products is estimated at approximately DM
90 billion. Of the 20 major mail order companies in Europe, 12 have their headquarters
located in Germany. Among them are the world's largest mail order companies: Otto
Versand in Hamburg and Quelle Schickedanz AG & Co. in Fuerth. In addition, several
German mail order companies operate in other European countries, as well.

Internet Sales:

Germany will become market leader among the EU countries with regard to sales over
the Internet by the year 2000. It is anticipated that by then German electronic sales,
which are estimated to reach a volume of DM 500 billion worldwide in 2000, become
second in the worldwide ranking after the United States and before Japan. A typical
German Internet user and a major German mail-order publication is between 20-39 years
old, is highly educated and earns more money than the average German consumer. This
age group consists of about 4.5 million Germans. Seventy percent of these consumers are
male. Already today, the Internet is a major sales channel for German mail-order houses.

Teleshopping:

QVC and HOT are the two tele-shopping channels in Germany. They operate all over
Germany and offer various types of giftware and handicrafts; jewellery, fashion, health,
beauty; household consumer goods; collectibles and home accessories.

18
O c c a s io n s fo r w h ic h g ift ite m s a r e o fte n p u r c h a s e d

B irthd ay
3 7%

O thers
17% C hristmas
17%
T hank Y o u
4 % E aster N o S p ecial V isit to
friend s/ family
6% O ccasio n
10 %
9%

19
SWOT Analysis of the Indian handicrafts industry

Strengths

• Abundant and cheap labour hence can compete on price

• Low capital investment and high ratio of value addition
• Aesthetic and functional qualities
• Wrapped in mist of antiquity
• Hand made and hence has few competitors
• Variety of products which are unique
• Exporters willing to handle small orders
• Increasing emphasis on product development and design upgradation

Weaknesses

• Inconsistent quality
• Inadequate market study and marketing strategy
• Lack of adequate infrastructure and communication facilities
• Capacity to handle limited orders
• Untimely delivery schedule
• Unawareness of international standards by many players in the market

Opportunities

• Rising appreciation for handicrafts by consumers in the developed countries

• Widespread novelty seeking
• Large discretionary income at disposal of consumer from developed countries
• Growth in search made by retail chains in major importing countries for suitable
products and reliable suppliers. Opportune for agencies to promote marketing
activities
• Use of e-commerce in direct marketing

20
Threats

Decline in India’s share due to:

Better quality products produced by competitors from Europe, South Africa, South Asia,
etc.
Better terms of trade by competing countries
Consistent quality and increasing focus on R&D by competing countries
Better packaging
Stricter international standards

21
OBJECTIVE

OF THE

STUDY

22
 OBJECTIVE OF THE STUDY

The research project is mainly divided into two parts first one is introduction to recession
and Indian handicraft market and the second is the study of impact of recession on Indian
handicraft export..

The subjects under these two parts are

1. Introduction about recession and Indian handicraft market

a. Introduction of recession
b. Causes and general impact of recession
c. Introduction of Indian handicraft market
d. Impact of recession on Indian economy.
2. Impact of recession on handicraft export from India
a. Collection of data about the export of handicraft from India to other
country of last three year.
b. Analyzing the data on the basis of data findings
c. Making a conclusion on the data analysis..

23
INTRODUCTION

TO

RECESSION

24
 NON FUEL PRODUCTS AT THE INDANE GAS OUTLETS

RECESSIONS ARE the result of reduction in the demand of products in the global
market. Recession can also be associated with falling prices known as deflation due to
lack of demand of products. Again, it could be the result of inflation or a combination of
increasing prices and stagnant economic growth in the west.

Recession in the West, especially the United States, is a very bad news for our country.
Our companies in India have most outsourcing deals from the US. Even our exports to
US have increased over the years. Exports for January have declined by 22 per cent.
There is a decline in the employment market due to the recession in the West. There has
been a significant drop in the new hiring which is a cause of great concern for us. Some
companies have laid off their employees and there have been cut in promotions,
compensation and perks of the employees. Companies in the private sector and
government sector are hesitant to take up new projects. And they are working on existing
projects only. Projections indicate that up to one crore persons could lose their jobs in the
correct fiscal ending March. The one crore figure has been compiled by Federation of
Indian Export Organizations (FIEO), which says that it has carried out an intensive
survey. The textile, garment and handicraft industry are worse affected. Together, they
are going to lose four million jobs by April 2009, according to the FIEO survey. There
has also been a decline in the tourist inflow lately. The real estate has also a problem of
tight liquidity situations, where the developers are finding it hard to raise finances.

IT industries, financial sectors, real estate owners, car industry, investment banking and
other industries as well are confronting heavy loss due to the fall down of global
economy. Federation of Indian chambers of Commerce and Industry (FICCI) found that
faced with the global recession, inventories industries like garment, gems, textiles,
chemicals and jewellery had cut production by 10 per cent to 50 per cent.

25
Definition of recession

Recession is not to be confused with depression. Recession means a slow down or slump
or temporary collapse of a business activity. In its early stage it can be controlled in a
methodical manner. Experience helps to avert total collapse. Unchecked, it leads to
severe depression. Depression is a dead end. It is time to close shop completely. It is a
total state of irrevocable economic failure. When a country is doing well all round its
Gross Domestic Product (GDP) is on the rise.

Overall economy is bullish; it is not only the stock exchanges that tell riches to rags
stories but even small businesses. It all adds to the national exchequer. An economist is
likely to give a detailed, comprehensive definition of recession. But for the layman who
has been affected knows it only one way-when he loses his job and has no money to pay
his credit and loans. Recession is when the consumer faces foreclosure and the banker
comes knocking for his pound (or dollar) of flesh. Many companies and whole countries
go bankrupt for want of liquid funds and cash flow for even daily requirements.

If you look at it from the point of view of a businessman, recession is a transitory phase.
The Business Cycle Dating Committee of the National Bureau of Economic Research has
another definition. It profiles the businesses that have peaked with their activity in one
season and it falls naturally in the next season. It regains its original position with new
products or sales and continues to expand. This revival makes the recession a mild phase
that large companies tolerate. As the fiscal position rises, there is no reason to worry.
Recession can last up to a year. When it happens year after year then it is serious.

Are we facing a recession or not? Yes, for the simple reason that not only our neighbors
but our friends are unemployed. There is less of business talk and more billing worries.
Transitory recessions are good for the economy, as it tends to stabilize the prices. It
allows run away bullish companies to slow down and take stock. There is a saying, ‘when
it’s tough the tough get going’. The weaker companies will not survive the brief recession
also. Stronger companies will pull through its resources. So when is it time to worry?

26
When you are facing a foreclosure, when the chips are down and out and creditors file
cases for recovery.

Firms face closures when they go through recession and are not able to recover from
losses. If, at this time, they are not able to sustain their prices and stocks then there is
more trouble. Even when the recession period gets over, they will not be able to do well.
If a business survives a recession period they should be able to survive a depression. But
how many recession proof businesses are there? Who will eventually survive the
recession?

1. Those that have been able to save their funds.

2. Those who have not invested in fly-by-night companies.
3. Those who remain clam till the storm passes.
4. Those that take stock immediately and decide to reinvest in a recession proof
business.

Identifying

In a 1975 New York Times article, economic statistician Julius Shiskin suggested several
rules of thumb to identify a recession; these included the rule of 'two successive quarterly
declines in GDP. Over time, the other rules have been largely forgotten, and a recession
is now often identified as the reduction of a country's GDP (or negative real economic
growth) for at least two quarters. Some economists prefer a more robust definition of a
1.5% rise in unemployment within 12 months.

In the United States the Business Cycle Dating Committee of the National Bureau of
Economic Research (NBER) is generally seen as the authority for dating US recessions.
The NBER defines an economic recession as: "a significant decline in [the] economic
activity spread across the country, lasting more than a few months, normally visible in
real GDP growth, real personal income, employment (non-farm payrolls), industrial
production, and wholesale-retail sales." Almost universally, academic economists, policy
makers, and businesses defer to the determination by the NBER for the precise dating of
a recession's onset and end.

27
Attributes

A recession has many attributes that can occur simultaneously and can include declines in
coincident measures of activity such as employment, investment, and corporate profits.

A severe (GDP down by 10%) or prolonged (three or four years) recession is referred to
as an economic depression, although some argue that their causes and cures can be
different.

Causes of recessions

• Currency crisis
• Energy crisis
• War
• Under consumption
• Overproduction
• Financial crisis
• Price of Fuels

Effects of recessions

• Bankruptcies
• Credit crunches
• Deflation (or disinflation)
• Foreclosures
• Unemployment

Stock market and recessions

Some recessions have been anticipated by stock market declines. In Stocks for the Long
Run, Siegel mentions that since 1948, ten recessions were preceded by a stock market
decline, by a lead time of 0 to 13 months (average 5.7 months), while ten stock market
declines of greater than 10% in the DJIA were not followed by a recession.

28
The real-estate market also usually weakens before a recession. However real-estate
declines can last much longer than recessions.

Since the business cycle is very hard to predict, Siegel argues that it is not possible to
take advantage of economic cycles for timing investments. Even the National Bureau of
Economic Research (NBER) takes a few months to determine if a peak or trough has
occurred in the US.

During an economic decline, high yield stocks such as fast moving consumer goods,
pharmaceuticals, and tobacco tend to hold up better. However when the economy starts to
recover and the bottom of the market has passed (sometimes identified on charts as a
MACD), growth stocks tend to recover faster. There is significant disagreement about
how health care and utilities tend to recover. Diversifying one's portfolio into
international stocks may provide some safety; however, economies that are closely
correlated with that of the U.S. may also be affected by a recession in the U.S.

There is a view termed the halfway rule according to which investors start discounting an
economic recovery about halfway through a recession. In the 16 U.S. recessions since
1919, the average length has been 13 months, although the recent recessions have been
shorter. Thus if the 2008 recession followed the average, the downturn in the stock
market would have bottomed around November 2008.

Recession and politics

Generally an administration gets credit or blame for the state of economy during its time.
This has caused disagreements about when a recession actually started. In an economic
cycle, a downturn can be considered a consequence of an expansion reaching an
unsustainable state, and is corrected by a brief decline. Thus it is not easy to isolate the
causes of specific phases of the cycle.

The 1981 recession is thought to have been caused by the tight-money policy adopted by
Paul Volcker, chairman of the Federal Reserve Board, before Ronald Reagan took office.
Reagan supported that policy. Economist Walter Heller, chairman of the Council of

29
Economic Advisers in the 1960s, said that "I call it a Reagan-Volcker-Carter recession.
The resulting taming of inflation did, however, set the stage for a robust growth period
during Reagan's administration.

It is generally assumed that government activity has some influence over the presence or
degree of a recession. Economists usually teach that to some degree recession is
unavoidable, and its causes are not well understood. Consequently, modern government
administrations attempt to take steps, also not agreed upon, to soften a recession. They
are often unsuccessful, at least at preventing a recession, and it is difficult to establish
whether they actually made it less severe or longer lasting.

History of recessions

Global recessions

There is no commonly accepted definition of a global recession, IMF regards periods

when global growth is less than 3% to be global recessions. The IMF estimates that
global recessions seem to occur over a cycle lasting between 8 and 10 years. During what
the IMF terms the past three global recessions of the last three decades, global per capita
output growth was zero or negative.

Economists at the International Monetary Fund (IMF) state that a global recession would
take a slowdown in global growth to three percent or less. By this measure, three periods
since 1985 qualify: 1990-1993, 1998 and 2001-2002.

According to economists, since 1854, the U.S. has encountered 32 cycles of expansions
and contractions, with an average of 17 months of contraction and 38 months of
expansion. However, since 1980 there have been only eight periods of negative economic
growth over one fiscal quarter or more, and four periods considered recessions:

• January-July 1980 and July 1981-November 1982: 2 years total

• July 1990-March 1991: 8 months
• March 2001-November 2001: 8 months

30
 • December 2007-current: 15 months as of March 2009

From 1991 to 2000, the U.S. experienced 37 quarters of economic expansion, the longest
period of expansion on record.

For the past three recessions, the NBER decision has approximately conformed to the
definition involving two consecutive quarters of decline. However the 2001 recession did
not involve two consecutive quarters of decline, it was preceded by two quarters of
alternating decline and weak growth.

Current recession in some countries

Official economic data shows that a substantial number of nations are in recession as of
early 2009. The US entered a recession at the end of 2007, and 2008 saw many
other nations follow suit. United States

The United States housing market correction (a consequence of United States housing
bubbles) and sub prime mortgage crisis has significantly contributed to a recession.

The 2008/2009 recession is seeing private consumption fall for the first time in nearly 20
years. This indicates the depth and severity of the current recession. With consumer
confidence so low, recovery will take a long time. Consumers in the U.S. have been hard
hit by the current recession, with the value of their houses dropping and their pension
savings decimated on the stock market. Not only have consumers watched their wealth
being eroded – they are now fearing for their jobs as unemployment rises.

U.S. employers shed 63,000 jobs in February 2008, the most in five years. Former
Federal Reserve chairman Alan Greenspan said on April 6, 2008 that "There is more than
a 50 percent chance the United States could go into recession.". On October 1, the Bureau
of Economic Analysis reported that an additional 156,000 jobs had been lost in
September. On April 29, 2008, nine US states were declared by Moody's to be in a
recession. In November 2008 Employers eliminated 533,000 jobs, the largest single
month loss in 34 years. For 2008, an estimated 2.6 million U.S. jobs were eliminated.

31
Although the US Economy grew in the first quarter by 1%, by June 2008 some analysts
stated that due to a protracted credit crisis and "rampant inflation in commodities such as
oil, food and steel", the country was nonetheless in a recession. The third quarter of 2008
brought on a GDP retraction of 0.5% the biggest decline since 2001. The 6.4% decline in
spending during Q3 on non-durable goods, like clothing and food, was the largest since
1950. A Nov 17, 2008 report from the Federal Reserve Bank of Philadelphia based on the
survey of 51 forecasters suggested that the recession started in April 2008 and will last 14
months. They project real GDP declining at an annual rate of 2.9% in the fourth quarter
and 1.1% in the first quarter of 2009. These forecasts represent significant downward
revisions from the forecasts of three months ago.

A December 1, 2008, report from the National Bureau of Economic Research stated that
the U.S. has been in a recession since December 2007 (when economic activity peaked),
based on a number of measures including job losses, declines in personal income, and
declines in real GDP.

Other countries

A few other countries have seen the rate of growth of GDP decrease, generally attributed
to reduced liquidity, sector price inflation in food and energy, and the U.S. slowdown.
These include the United Kingdom, Canada, Japan, Australia, China, India, New Zealand
and the Euro zone. In some, the recession has already been confirmed by experts, while
others are still waiting for the fourth quarter GDP growth data to show two consecutive
quarters of negative growth. India along with China is experiencing an economic
slowdown but not a recession.

32
Current crisis in the US

The defaults on sub-prime mortgages (home loan defaults) have led to a major crisis in
the US. Sub-prime is a high risk debt offered to people with poor credit worthiness or
unstable incomes. Major Banks have landed in trouble after people could not pay back
loans.

The housing market soared on the back of easy availability of loans. The realty sector
boomed but could not sustain the momentum for long, and it collapsed under the
gargantuan weight of crippling loan defaults. Foreclosures spread like wildfire putting the
US economy on shaky ground. This, coupled with rising oil prices at $100 a barrel,
slowed down the growth of the economy.

Past recessions in the US

The US economy has suffered 10 recessions since the end of World War II. The Great
Depression in the United was an economic slowdown, from 1930 to 1939. It was a
decade of high unemployment, low profits, low prices of goods, and high poverty.

The trade market was brought to a standstill, which consequently affected the world
markets in the 1930s. Industries that suffered the most included agriculture, mining, and
logging.

In 1937, the American economy unexpectedly fell, lasting through most of 1938.
Production declined sharply, as did profits and employment. Unemployment jumped
from 14.3 per cent in 1937 to 19.0 per cent in 1938.

The US saw a recession during 1982-83 due to a tight monetary policy to control
inflation and sharp correction to overproduction of the previous decade. This was
followed by Black Monday in October 1987, when a stock market collapse saw the Dow
Jones Industrial Average plunge by 22.6 per cent affecting the lives of millions of
Americans.

33
The early 1990s saw a collapse of junk bonds and a financial crisis.

The US saw one of its biggest recessions in 2001, ending ten years of growth, the longest
expansion on record.

From March to November 2001, employment dropped by almost 1.7 million. In the 1990-
91 recessions, the GDP fell 1.5 per cent from its peak in the second quarter of 1990. The
2001 recession saw a 0.6 per cent decline from the peak in the fourth quarter of 2000.

The dot-com burst hit the US economy and many developing countries as well. The
economy also suffered after the 9/11 attacks. In 2001, investors' wealth dwindled as
technology stock prices crashed.

34
 RESEARCH
METHODOLOGY

35
 RESEARCH METHODOLOGY

Research methodology is considered as the nerve of the project. Without a proper well-
organized research plan, it is impossible to complete the project and reach to any
conclusion. The project was based on the survey plan. The main objective of survey was
to collect appropriate data, which work as a base for drawing conclusion and getting
result.

Therefore, research methodology is the way to systematically solve the research

problem. Research methodology not only talks of the methods but also logic behind the
methods used in the context of a research study and it explains why a particular method
has been used in the preference of the other methods

Research design:

Research design is important primarily because of the increased complexity in the market
as well as marketing approaches available to the researchers. In fact, it is the key to the
evolution of successful marketing strategies and programmers. It is an important tool to
study buyer’s behavior, consumption pattern, brand loyalty, and focus market changes. A
research design specifies the methods and procedures for conducting a particular study.
According to Kerlinger, “Research Design is a plan, conceptual structure, and strategy of
investigation conceived as to obtain answers to research questions and to control
variance.

Types of research is:

• Descriptive Research

The type of research adopted for study is descriptive. Descriptive studies are undertaken
in many circumstances when the researches is interested to know the characteristic of
certain group such as age, sex, education level, occupation or income. A descriptive study
may be necessary in cases when a researcher is interested in knowing the proportion of

36
people in a given population who have in particular manner, making projections of a
certain thing, or determining the relationship between two or more variables. The
objective of such study is to answer the “who, what, when, where and how” of the subject
under investigation. There is a general feeling that descriptive studies are factual and very
simple. This is not necessarily true. Descriptive study can be complex, demanding a high
degree of scientific skill on part of the researcher.

Descriptive studies are well structured. An exploratory study needs to be flexible in its
approach, but a descriptive study in contrast tends to be rigid and its approach cannot be
changed every now and then. It is therefore necessary, the researcher give sufficient
thought to framing research.

Questions and deciding the types of data to be collected and the procedure to be used in
this purpose. Descriptive studies can be divided into two broad categories: Cross
Sectional and Longitudinal Sectional. A cross sectional study is concerned with a sample
of elements from a given population. Thus, it may deal with household, dealers, retail
stores, or other entities. Data on a number of characteristics from sample elements are
collected and analyzed. Cross sectional studies are of two types: Field study and Survey.
Although the distinction between them is not clear- cut , there are some practical
differences, which need different techniques and skills. Field studies are ex-post-factor
scientific inquiries that aim at finding the relations and interrelations among variables in a
real setting. Such studies are done in live situations like communities, schools, factories,
and organizations.

Another type of cross sectional study is survey result, which has been taken by me. A
major strength of survey research is its wide scope. Detail information can be obtained
from a sample of large population .Besides; it is economical as more information can be
collected per unit of cost. In addition, it is obvious that a sample survey needs less time
than a census inquiry. Descriptive research includes survey and fact finding enquiries of
different kinds of the major purpose. Descriptive research is description of the state of
affairs, as it exists at present. The main characteristic of this method is that the researcher
has no control over the variables; he can only report what has happened or what is

37
happening. The methods of research utilized in descriptive research are survey methods
of all kinds including comparative and co relational methods. The reason for using such
needs to be flexile in its approach, but a descriptive study in contrast tends to be rigid and
its approach cannot be changed ever now and then.

Data collection methods:

After the research problem, we have to identify and select which type of data is to
research. At this stage; we have to organize a field survey to collect the data. One of the
important tools for conducting market research is the availability of necessary and useful
data.

Primary data: The primary data is collected from department of commerce

Government of India and handicraft export Promotion Corporation of India. This data is
export data of last few years of handicraft export.

Secondary Data - The Company’s profile, journals and various literature studies are
important sources of secondary data.

Data analysis and interpretation

1. Pie chart and Bar chart

38
Pie chart:

This is very useful diagram to represent data , which are divided into a number of
categories. This diagram consists of a circle of divided into a number of sectors, which
are proportional to the values they represent. The total value is represented by the full
create. The diagram bar chart can make comparison among the various components or
between a part and a whole of data.

Bar chart:

This is another way of representing data graphically. As the name implies, it consist of a
number of whispered bar, which originate from a common base line and are equal widths.
The lengths of the bards are proportional to the value they represent.

Preparation of report:

The report was based on the analysis and presented with the findings and suggestions.
The sample of the questionnaires is attached with the report itself.

39
 IMPACT OF AN
AMERICAN RECESSION
ON INDIA

40
Impact of an American Recession on India

Indian companies have major outsourcing deals from the US. India's exports to the US
have also grown substantially over the years. The India economy is likely to lose between
1 to 2 percentage points in GDP growth in the next fiscal year. Indian companies with big
tickets deals in the US would see their profit margins shrinking.

The worries for exporters will grow as rupee strengthens further against the dollar. But
experts note that the long-term prospects for India are stable. A weak dollar could bring
more foreign money to Indian markets. Oil may get cheaper brining down inflation. A
recession could bring down oil prices to $70.

The whole of Asia would be hit by a recession as it depends on the US economy. Even
though domestic demand and diversification of trade in the Asian region will partly
counter any drop in the US demand, one simply can't escape a downturn in the world's
largest economy. The US economy accounts for 30 per cent of the world's GDP.

Says Sudip Bandyopadhyay, director and CEO, Reliance Money: "In the globalised
world, complete decoupling is impossible. But India may remain relatively less affected
by adverse global events." In fact, many small and medium companies have already
started developing trade ties with China and European countries to ward off big losses.

Manish Sonthalia, head, equity, Motilal Oswal Securities, says if the US economy
contracts much more than anticipated, the whole world's GDP growth-which is estimated
at 3.7 per cent by the IMF-will contract, and India would be no exception.

The only silver lining is that the recession will happen slowly, probably in six months or
so. As of now, IT and IT-enabled services, textiles, jewellery, handicrafts and leather
segments will suffer losses because of their trade link. Certain sections of commodities
could face sharp impact due to the volatile nature of these sectors. C.J. George, managing
director, Geojit Financial Services, says profits of lots of re-export firms may be affected.

41
Countries like China import commodities from India do some value-addition and then
export them to the US.

The IT sector will be the worst hit as 75 per cent of its revenues come from the US. Low
demand for services may force most Indian Fortune 500 companies to slash their IT
budgets. Zinnov Consulting, a research and offshore advisory, says that besides
companies from ITeS and BPO, automotive components will be affected.

During a full recession, US companies in health care, financial services and all
consumers demand driven firms are likely to cut down on their spending. Among other
sectors, manufacturing and financial institutions are moderately vulnerable. If the service
sector takes a serious hit, India may have to revise its GDP to about 8 to 8.5 per cent or
even less.

Lokendra Tomar, senior vice-president, Integreon, a BPO firm, says the US recession is
likely to have a dual impact on the outsourcing industry. Appreciating rupee along with
poor performance of US companies (law firms, investment banks and media houses) will
affect the bottom line of the outsourcing industry. Small BPOs, which are operating at a
net margin of 7-8 per cent, will find it difficult to survive.

According to Dharmakirti Joshi, director and principal economist of CRISIL, along and
severe recession will seriously affect the portfolio and fixed investment flows. Corporates
will also suffer from volatility in foreign exchange rates. The export sector will have to
devise new strategies to enhance productivity.

10 Indian industries to do well during recession

In the current global economic slowdown, every sector of business is being affected and
is witnessing a hard time. But IKON Marketing Consultants reports that in India there are
few sectors which will grow in this adverse situation.

42
AS EVERY business sector is affected by present global crisis and everybody is talking
of slow down in business, still in India there are few sectors which will grow in this
adverse situation. Let’s have a look.

43
1. Food

No one can survive without basic food material like milk, vegetables and drinking water.
Food processing companies will not be affected much and rather will earn profits by
increasing the prices. These are the basic needs which we as a common man can not
produce by our self.

According to Ministry of Food Processing Industry (MFPI), the food processing industry
in India was seeing growth even as the world was facing economic recession. According
to the minister, the industry is presently growing at 14 per cent against six to seven per
cent growth in 2003–04.The Indian food market is estimated at over US$ 182 billion and
accounts for about two thirds of the total Indian retail market. Further, the retail food
sector in India is likely to grow from around US$ 70 billion in 2008 to US$ 150 billion
by 2025.

2. Railway

As the aviation sector has been affect much badly and resulting in sharp rise in the air
ticket rates the frequent travelers’ will prefer railways to cut the cost of traveling and this
will result in increased traffic in railways and long queues at railway booking counters.
The freight traffic of Indian Railways has continued to grow in the last few months, albeit
at slow pace, indicating only marginal impact of the global recession on the Indian
economy.

The railways registered 13.87 per cent growth in revenue to Rs 57,863.90 crore in the
first nine months ended December 31, 2008. While total earnings from freight increased
by 14.53 per cent at Rs 39,085.22 crore during the period, passenger revenue earnings
were up 11.81 per cent at Rs 16,242.44 crore. The railways have enhanced freight
revenue by increasing its axle loading, improving customer services and adopting an
innovative pricing strategy.

44
3. PSU Banks

As seen in the private sector much of the job cuts due to global slowdown, it’s the public
sector undertaking (PSU) banks which gained much confidence due to job safety and
security. More and more people are likely to turn towards government institutions,
particularly banks in the quest for safety and security.

A report "Opportunities in Indian Banking Sector", by market research company,

RNCOS, forecasts that the Indian banking sector will grow at a healthy compound annual
growth rate (CAGR) of around 23.3 per cent till 2011.

4. Education

As education is considered as the basic necessity and in India it is seen as a long term
investment by parents and with respect to the demand still there is a huge supply gap. The
craze to study in foreign university among the Indian youth still alive which will prompt
foreign education institute to target India provided vast young population willing to join.
We will see more and more foreign educational institutions coming up in India in recent
coming years.

Huge government as well as private investment is likely to flow into the Indian
educational system. D E Shaw, a US$ 36 billion, global private equity firm is planning to
invest around US$ 200 million in the Indian education sector.

5. Telecom

People will not stop to communicate with each other due to global crises rather it has
been seen that it will increase much particularly with mobile communication. With cheap
cell phones available in the Indian market and cheaper call rates, the sector has become
the necessity and primary need of everyday life.

Telecom sector, according to industry estimates, year 2008 started with a subscriber base
of 228 million and will likely to end with a subscriber base of 332 million – a full

45
century. The telecom industry expects to add at least another 90 million subscribers in
2009 despite of recession. The Indian telecommunications industry is one of the fastest
growing in the world and India is projected to become the second largest telecom market
globally by 2010.

6. IT

Recent news shown that Indian IT sector will grow 30 to 40 per cent next year. And on
the other side to survive in current slowdown, industries have to decrease the cost and for
that they will resort to customised IT solutions which will further boost up the software
solution demand.

India is fast becoming a hot destination for outsourced e-publishing work. As per a
Confederation of Indian Industry (CII) report, the industry is growing at an annual rate of
35 per cent and India’s outsourcing opportunities in the value-added and core services
such as copy editing, project management, indexing, media services and content
deployment will help make the publishing BPO industry worth US$ 1.46 billion by 2010.

7. Health care

India in case of health care facilities still lakes the adequate supply. In health care sector
also there is huge gap between demand and supply at all the levels of society. Still there
are so many urban areas were you could hardly find any multi specialty hospital. And in
case of metros the market sentiments itself created a need of psychological consultation.

Healthcare, which is a US$ 35 billion industry in India, is expected to reach over US$ 75
billion by 2012 and US$ 150 billion by 2017. The healthcare industry is interestingly
poised as it strives to emerge as a global hub due to the distinct advantages it enjoys in
clinical excellence and low costs.

8. Luxury products

The high and affluent class of society will not be affected much by this global crises even
if their worth is reduced significantly. They will not change their lifestyle and will not

46
stop spending on luxurious goods. So luxurious product market will not be affected and
in fact to maintain the lifestyle those affluent will spend more for it. Luxury car makers
are pouring in to woo the nouveau riche (Audi, BMW are the most recent entrants).

9. M&A & Marketing Consultants

As in the current business slow down survival will be the main focus, the marketing and
management consultants will be called for to reduce the costs and to show the ways to
survive and stay in market. Others may join hands to fight with this situation together will
call for the Marketing & M&A consultants. In a booming market there are growth
strategies and M&A opportunities to advise on. When businesses are cutting back,
consultancies will be right there to help clients decide where to wield the axe.

According to Ministry of Commerce and Industry’s estimation, the current size of

consulting industry in India is about Rs 10000 crores including exports and is expected to
grow further at a CAGR of aproximately 25 per cent in next few years.

10. Media and Entertainment

In current bad times, where people are losing jobs and getting enough time to watch TV,
they will seek entertainment at home and hence advertising revenues will increase for the
commercial channels. Also businesses like production of religious texts and religious
materials, religious channels will do well. The TRP of religious channels will increase
compare to the other entertaining/commercial channels.

According to a report published by the Federation of Indian Chambers of Commerce and

Industry (FICCI), the Indian M&E industry is expected to grow at a compound annual
growth rate (CAGR) of 18 per cent to reach US$ 23.81 billion by 2012. According to the
PWC report, the television industry was worth US$ 5. 48 billion in 2007, recording a
growth of 18 per cent over 2006. It is further likely to grow by 22 per cent over the next
five years and be worth US$ 12. 34 billion by 2012.

47
The spectacular collapse of Lehman Brothers, 150-year-old company, when it applied for
bankruptcy surprised everyone. The crisis arose due to a host of small banks which had,
for several years, been sanctioning housing loans without, or inadequate, securities. There
is no doubt that the Wall Street crisis will only have a marginal effect on India, thanks
largely to the cautious regulatory system in place.

It would be naïve to imagine that a recession in the United States would have no impact
on India. The United States accounts for one-fourth of the world GDP and any significant
slowdown is bound to have reverberations elsewhere. On the other hand,
interdependencies between the US economy and emerging economies like India and
China has reduced considerably over the last two decades.

India has sharply criticized the United Nations (UN) and its affiliated organizations for
sitting on the sidelines as the current financial crisis unfolded, saying the International
Monetary Fund remained helpless despite the economic meltdown impacting the
developing nations.

India called on the world body to use its universality to coordinate an international
response, which is crucial to overcoming the crisis.

• Indian Software Industry: Turbulence in the global financial markets could

translate into nasty surprises for the Indian Software Industry. The Indian IT
vendors have been facing challenging times as a result of uncertainty in the US
and Europe for well over a year now.

The crisis though is not going to be restricted to the vendors exposed to these
companies alone. The heat will be felt across the industry as the crisis leads to an
overall slowdown in IT spends. Overall, the market will don a more conservative
approach toward any spending, including IT spending, as the companies want to
wait and watch whats going to happen to the business. When the whole industry is

48
 in turmoil, companies become cautious and step back to think how and where to
spend, explains Arvind Thakur, CEO, NIIT Technologies.

• Preliminary analysis of the current scenario indicates an impact on discretionary

spend on IT due to the uncertainty and customer decisions being postponed .In the
short-term the vendors will continue to get the same growth rate. While non-
discretionary spend is not going to get much impacted, the discretionary spend
(on new technologies and integration of new technologies) is going to be limited.
Non-discretionary IT spend will typically include existing work, live projects and
maintenance kind of work.
• Demand Slowdown: Six months after Bear Sterns went under and was acquired
by JP Morgan, the latest series of events in the US financial sector would further
slow down the demand for IT services. Most IT companies, however, did not
offer any comment citing ‘silent period before quarterly results. In IT budgets, the
non-discretionary spend, which is about 70 per cent, will continue. In a downturn,
discretionary spend on new projects, innovation or up gradation gets affected. The
impact, if any, will be on the latter. Unfortunately, the economic slowdown has
been catching up with the other verticals as well, namely telecom, retail and
manufacturing, especially the automobile segment. Some of the damage control
measures by the US may make matters worse for Indian IT companies.
• Disinvestment: The immediate effect has been the disinvestment in Indian Share
Market by Foreign Institutional Investors. during the past few years, foreigners
have pumped in about 60 odd billion dollars in order to buy shares in Indian
companies. the resource crunch and liquidity problems in Wall Street forced them
to liquidate their Indian share holdings. This led to the crash of the SENSEX and
the artificial hue and cry over it. But as the foreign investors withdrew their
investments, we had a net outflow of foreign funds, depressing the exchange
value of the Rupee against the Dollar and other currencies.
• Banking System: We have a chain of banking system based still on concept of
welfares rather than profits. The urban (52) and state cooperative banks (16) have
been playing significant roles in making 'fundamental our economy' strong.

49
 We have had developed 'a scientific fiscal mechanism of consistent monitoring'
system for our banking system which would keep our economy safe in extensor,
when the world's economy is in extremis.

Common men, pensioners and small domestic savings still prefer post offices for
one simple reason, the high rates of interest rates in comparison with any other
financial institutions.

• Export Businesses: Export Businesses will suffer because of fall in foreign

demand, but the depressed Indian Rupee will set it off to some extent. The rest of
us in rural India should not suffer much - but alas! our capitalist-oriented
Government will make us suffer. Because their greatest blue eyed pets, the
capitalists who suffer losses due to depression of the value of the shares of their
companies, will raise pressure on the Ministers of the Government. Even the
prices of petrol and diesel will not be corrected down wards, because
Government's pet boys may suffer loss of excess profits. So, the government will
make us suffer.
• Rural Economy: Economic crisis that is now “crushing” the poor around the
globe and for lacking any vision for the future or how the organization could help
developing countries deal with the serious looming challenges. The upheavals in
the financial markets have very little to do with rural economy. Indian financial
market especially banks have always been under RBI scanner, even during normal
times.
• Mass Layoffs: Indians are not used to mass layoffs. The recent economic boom
has conditioned them to expect big companies to announce big profits, not
wholesale sackings. India's rigid industrial relations system has also long
discouraged corporations from making big retrenchments. India’s biggest private
airline, Jet Airways, found out how deeply the community resents this industrial
strategy when it "released" 1900 workers.A crowd of newly retrenched cabin
crew, dressed in uniform, stormed the airline's headquarters in Mumbai to vent
their anger.

50
 • Handicraft Sector : The handicrafts sector will be the most severely hit, followed
by gems and jewellery. There has been a massive decline of 40-50 percent in
handicraft exports from last year.That’s because this market is almost completely
US-driven. In gems and jewellery, growth was projected at 20 percent, but due to
the dwindling value of the dollar and the slowdown in the US, the growth rate is
down to 10 percent.

In light of the historical significance of the crisis it is too early to predict all its
consequences. What we can be sure about, though, is that the world economy in general
and the developing countries in particular will suffer from it in the future.

51
 IMPACT ON INDIAN HANDICRAFT EXPORT

India's exports of handicrafts fell by 48% to $1.79 billion due to the impact of recession
in the US and several European economies.

Export Promotion Council for Handicrafts (EPCH) Executive Director Rakesh Kumar
said that a plan was being worked out to identify new markets in Latin America, China
and the Middle East to bring down the present dependence on western markets. The
EPCH expects to recover to the 2007-08-level exports of $3.48 billion this fiscal.

The demand for Indian handicraft arts, including metalware, woodware, hand-printed
textiles and scarves, besides zari goods and imitation jewellery plunged in America and
many prominent European markets. These markets together account for over 65% of
Indian handicraft exports providing jobs to one million artisans.

Ahmedabad: with the help of a metal tong, he deftly puts bamboo peels inside an empty
glass bottle. after an hour, much to the amazement of onlookers there is a miniature ship
floating inside the bottle made of bamboo pieces. anthony joseph, an artisan from
porbander, has mastered the skill of making decorative items from bamboo pieces to eke
out a living. last year, he was in germany for 45 days and did business worth rs 1.5 lakh.
similarly, kailash mochi puts soft hide layer by layer on a wooden skeleton to create a
tiny animal, as a drawing room art piece. mochi, an artisan from anand, too went abroad
and earned rs 60,000 during his four-day stay at hong kong. both of them were here in the
city to showcase their products along with other artisans from across the state at the rural
enterprise summit organised by the confederation of indian industry (cii). when all
industries are trying hard to beat recession, handicrafts is one sector which is abuzz with
the feeling of hitting good fortune. "we expect exports worth about rs 80 lakh, up by rs 20
lakh from last year," says hitendra rami of nandanvan, a co-operative of artisans from
ambaji in banaskantha district. nandanvan, a 180-member co-operative society, has put
up a stall for its handicrafts manufactured from coconut waste for official and domestic
use. "we have gained a lot of experience while dealing directly with exporters in terms of
product quality and their choices during trade fairs," rami adds. "there is a lot of scope for

52
further expansion of the handicrafts market provided artisans know the specifications of
the international demand," says sanjay nirvan, exhibition in-charge, rural technology
institute (rti), gandhinagar. rti which extends conducts refresher programmes, besides
providing working capital for state artisans, feels that handicrafts market remained
largely unaffected from global recession. "the sector does have an effect from
international market but still we are on the higher end of the graph," says s p singh, a
leather technologist with rti. "we have to continuously fine tune our handicrafts as per
international preferences," adds singh. with a contingent of artisans from kutch rti would
represent gujarat at the forthcoming india international trade fair in new delhi from
november 14 to 22 for the third consecutive year. "this time we have kept our focus on
kutch, cashing on the sympathy wave after the quake," says nirvan, adding that artisans
expect more exports this year. rti won export orders for embroidery, leather products,
patch work, bamboo work, 'kutchi' shawls and crafts last year from the us, hong kong and
germany, and are anxious to repeat the same this year too with increased profit margins.
experts also feel the sector was independent of international sentiments and insulated
from the overall economic slowdown. the insulation from international markets was
largely due to the lack of competition from large corporates, they say. the sector
continues to flourish despite the overall recession as people have to buy gifts for diwali,
christmas and new year celebrations. moreover, the exposure at trade fairs resulted in
developing a sustained market for indian handicrafts in the international arena, which
today stands at rs 12,000 crore. as per data compiled by the cii, gujarat contributes rs 800
crore worth of export orders. "the sector remained largely unaffected due to various
contractual schemes, charity donations, besides the uniqueness and innovative nature of
the products," said a senior official of cii (gujarat). regular interaction between artisans
and exporters was another reason cited by cii for sustained increase in the sector's
turnover which negated the role of middlemen to a large extent.

PREVIOUS RESULTS

Handicraft exports from the country recorded a 14.57 per cent increase in dollar terms in
April-January 2007 to $2.91 billion compared with $2.54 billion in the same period in the
previous year.

53
In rupee terms, exports grew 18.13 per cent to Rs 13,269 crore (Rs 11,233 crore).

In fiscal 2005-06, exports grew 11.46 per cent to Rs 14,527 crore (Rs 13,033 crore). In
dollar terms, they grew 10.06 per cent to $3.28 billion ($2.98).

In its efforts to reduce the dependence on western markets, the Export Promotion Council
for Handicrafts (EPCH) is working on a gameplan for exploring new markets in Latin
America, China, Brazil and the West Asia.

On the back of new exporting destinations, the EPCH hopes to regain the 2007-08
performance of $3.48 billion in the current fiscal. “We will be able to achieve at least
$3.4 billion. We are working hard. We have prepared a detailed action plan for exploring
new markets in Latin America, China, Brazil and West Asia,” EPCH Executive Director
Rakesh Kumar said here today.

Demand for Indian handicrafts, art metalware, woodware, hand-printed textiles and
scarves, zari goods and imitation jewellery, saw a massive erosion in the US and
prominent European markets.

The US and the EU, together account for over 65 per cent of the Indian handicrafts
exports, which provide jobs to one million people.

However, anticipating a revival in demand, Kumar said, “Shops in the US and the EU
have started buying again.”

US-based retail chain, Cost Plus World Market, which has been importing Indian
handicrafts for the past 49 years, purchases half of its goods from the country.

During 2008-09, it reduced its imports of wooden furniture, seasonal items and art
metalware as the demand was severely impacted due to global recession.

54
DATA ANALYSIS

AND

INTERPRETATION

55
Replace the page with the data analysis page

56