Strategies for prolonging the profitability period under possible risk of overheating of the economy for Indian businesses

Abstract

The focus of our report is to see the impact of current macroeconomic changes on the business performance of various firms, mainly capital intensive, to study the strategies adopted by firms in order to cope up with these changes and also to look for other possible sources of funding through our understanding of the situation and knowledge of macroeconomics. The monetary tightening stance adopted by the RBI has slowly started bearing impact. Under the pressure of reducing liquidity due to CRR and Repo rate hike, Banks have raised interest rates and their lending norms have become more stringent. At the same time, the Working Capital requirements for businesses are increasing. The effect is being slowly felt across the business domain. The firms are mainly hit through three aspects; demand ,raw material costs and funding strategies. We observed a few representative macroeconomic indicators to study the current scenario and how it has impacted the firms through these three areas. Then we have analysed the current impact of these conditions on certain capital intensive industries such as airlines, auto, consumer durables, real estate etc. In tune with such difficulties faced, corporate India is bracing up to the challenge with steps to increase sales, reduce costs and look for alternative sources of funding. The current scenario has given rise to several innovative and potentially effective strategies that are mentioned in the report. The findings of this part are based on interviews conducted by us and also newspaper reports. Towards the end of the report, we have tried to recommend alternate strategies and sources of funds to various firms.