Let's find our own ways to remain profitable

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Bikky Khosla | 03 Feb, 2009
Despite the country's export performance in December 2008, which saw a relative improvement compared to the performance of the previous two months, its growth still remained in the negative territory.

Yes, the drop in exports was restricted to 1.1% at $12.7 billion over December 2007, yet sectors including gems & jewellery, textiles, handloom and chemicals continue to take a battering. The handicraft and handloom sectors' exports suffered the most with export growth plumetting to a negative 64% in December 2008, while the pharmaceuticals, engineering products and some agricultural commodities emerged as the saving grace.

And while industry circles are hoping for a third stimulus to rev up the economy, I get a feeling that it is unlikely to happen. With the General Elections round the corner, the government is likely to concentrate solely on various politically-sensitive issues rather than providing concessions to the industry. However, certain procedural issues pertaining to exporters are likely to be answered.

The recent reduction last week in fuel prices is an obvious indication that the government will now focus on controlling inflation, which in turn will strengthen their chances in the forthcoming elections.

Even Commerce Secretary G K Pillai reacting to the key suggestions of FIEO to increase duty drawback and DEPB rates and interest subvention at 7% across all sectors, had made it clear by saying that "We have told the exporters very clearly that there is unlikely to be any duty drawback hikes or increase in DEPB rates."

So basically exporters got what they got. New incentives I feel will not come their way, as of now. Thus exporters themselves have to find ways to beat the downturn in demand for goods in global markets.

During these times it becomes essential to monitor one's cash flow carefully. It is advisable to forecast one's cash flow monthly and ensure that one's expenses do not exceed them. Also one should not forget to project cash requirements a few months in advance.

Secondly, making the best of one's existing inventories can be the mantra to beat recession and remain competitive. One needs to evaluate the stock of raw materials, unfinished goods in production process in progress, finished goods ready to be sold, etc. The key to success can be to convert excess, obsolete, and slow-moving inventory items into cash.

Thirdly, try to negotiate with suppliers and obtain cost reduction. Also convince them that you value the relationship you have developed but you need a cost reduction immediately as your company has reviewed its cost structure and has determined that it needs to lower supplier costs and ask for a longer payment cycle.

The bottom line is that through well-planned initiatives, businesses can overcome obstacles by taking creative paths. This is the time to implement some smart business practices that will make one's future recession proof. Since we don't know how long the current situation is going to persist, it is best to make one's own way out of it instead of waiting for our politicians to give incentives which are unlikely. While they play their little games to capture votes, we need to find our own ways to remain profitable.