Poor monsoon and agriculture's moderate show, besides creeping inflation, make for a worrisome recipe. Industry is growing at a lower clip. But the most bothersome is the incipient economic slowdown that may affect the flow of tax revenue that has been buoyant so far.

An early indication of the slowdown came from the mid-term credit policy for 2000-2001, that pegged down real GDP growth for 2000-2001 to 6-6.5 per cent from the earlier 6.5-7 per cent. CMIE also cut its 2000-2001 GDP growth from 7 per cent to 5.8 per cent. The fear of slowdown looks real but is the slowdown peculiar to India alone?

Not really. Salomon Smith Barney (SSB), an equity research firm, in its economic review feels the slowdown is global and may affect Asian economies.

It has pared down global third quarter growth by 0.3 per cent for 2001. It says global growth is slowing, so should Asian growth. Its Asian growth forecasts are a tad lower by 0.2 per cent to 6.7 per cent. The vulnerable economies are: the Philippines, Thailand and Indonesia. Incidentally, these economies suffered the most from the 1997 currency contagion.

Falling equity prices globally, are an indication of the slowdown. Indian bourses reflecting the global trend have been in a tailspin recently.

Currencies are expected to be under pressure. Yet, SSB is not downbeat on global prospects. Falling equity prices alone are not a sufficient indicator of slowdown.

The argument that stock markets are anticipating slower growth because of high oil prices needs more solid support from other factors. SSB comments, "We are not saying that stock market trends have no information for future economic performance, only that the information comes wrapped within a lot of noise and thus must be balanced judiciously with other indicators of the business cycle." There is a divergence in the performance of Indonesia and Malaysia, both oil exporters.

Indonesia may grow by 4.4 per cent and Malaysia by 7 per cent in 2001. Indonesia is plagued by political uncertainty, while Malaysia enjoys relative political stability. Local factors count for a lot in the performance of the Asian economies. SSB hopes there may be softer landing for the global economy all the same. It will take a financial distress greater in magnitude than the 1997 Asian currency turmoil to cause a global crash. Though global equity prices are moving southward, they do not point to a crash in the offing. This modest expectation hinges on two factors: firstly, oil prices will not spike and secondly, the US growth will continue. Oil prices look like stabilising somewhat and the US economy's soft landing or otherwise will depend on the change of guards at the White House. For India, slowdown may not be good news, but it is not an unmitigated disaster either. Strangely, the fallout of global slowdown shows Indian economy's integration with the global economy is on with implications for thecountry's trade.

Jindal Strips (JSL)
Jindal Strips' showing in the quarter ended September 2000 looks good, bar a dip in operating profit margin (OPM) from 23.9 per cent to 19 per cent. But that does not decry from an all round growth down the line. Nickel price rules still high in the second quarter despite a fall from its peak level.

Nickel prices were in the range of $7,000 - $10,000 per metric tonne (mt). Yet, high HR strips and coil prices have caused raw material consumption to rise, thus bloating total expenditure. The shrinkage in margins was inevitable.

The results exclude the performance of the Vasind division. But figures do compare with those of the comparable period as the same have been regrouped.

Turnover went up 42 per cent to Rs 352 crore mainly on the back of higher price realisations. The raw material consumption shot up by 99 per cent, which accounts for close to 90 per cent of total expenditure. The company could not pass on the entire rise in the cost of production to the customers.

Operational profit was up 13 per cent to Rs 67 crore. Interest remained unchanged at Rs 28 crore, but depreciation increased by 25 per cent to Rs 19 crore, as a result of commissioning of Phase-I of its cold rolling project.

The bottomline improved by 23.1 per cent to Rs 21 crore.The company turns out stainless steel viz CR strips, flats. After completion of Phase-II of the stainless steel - cold rolling project, the capacity will triple to 90,000 mt. This has come at a time when the capacity utilisation is well over 100 per cent, justifying additional capacity.

Higher capacity will help to improve the share of high value added products in its sales income. This could help the company to neutralise the rising cost of raw materials.

Prices of major inputs such as HR strips and coils, steel scrap, chrome and nickel have gone up. The average increase in the prices has been 35 to 40 per cent plus.

Per capita consumption of stainless steel is very low in India, indicating a huge potential in domestic market. A seven-fold rise in exports to $28.5 million, countering anti-dumping duty in the US market, speaks of the company's marketing skill. The Jindal Strip scrip is stable around Rs 60 mark, reflecting market indifference towards the steel industry.

SR Kasbekar and Manish Joshi