India exercises caution during crisis

AMAN WALIA, 21, dreamed of flying. Armed with a student loan, he enrolled in flight attendant school and snatched himself a dream job with Jet Airways, India's largest private carrier, six months ago. In short order, he bought his first car, renovated his apartment and threw himself into the high life of young, exuberant New India. However, last week, he was fired.

Jet Airways, having posted large losses over the last year, announced layoffs of 1,900 crew members, all recent hires still on probation. It was part of India's first taste of pain from a bruising global economic slowdown.

"Dreams are on hold right now," Walia said last Thursday. He and dozens of other former Jet employees, the men in navy suits and the women in knee-length golden yellow jackets, marched incongruously through the domestic airport, shouting slogans. "Jet Airways, down, down," they chanted as television news cameras rolled.

While the airline reversed itself later in the day and reinstated the workers, the shock seemed likely to linger. Until recently, Indians had been spared the worst of the fallout from the current global financial crisis: no mass foreclosures, no banks threatening default under mountains of debt.

But India's fast-clip economy is now beginning to show signs of a slowdown, in turn tamping the country's newfound predilection to spend. Unlike the frugal generations before them, Indians of Walia's age and class are the first to consume lustily, and without much worry about the future.

New India's advertising jingles testified to the new urge. "Fly the Good Times" is the motto of Jet's main competitor, Kingfisher Airlines. Jet and Kingfisher announced recently that they would form an alliance, sharing crews and collaborating on routes. Rama Bijapurkar, a management consultant and author of "Winning in the Indian Market," said India was better protected than many other countries because it had been slow to open the floodgates to the world financial sector. "We will feel the heat but not be consumed by the fire," she said in an e-mail message.

Nevertheless, new uncertainties have set in. The Indian stock market has plummeted, precisely when Indians were jumping into the market for the first time. Property prices have begun to drop, as interest rates rise and developers face an acute capital crunch. Indian consumers are buying fewer cars, the ultimate symbol of success for many. They are even becoming cautious about buying gold in the days leading to the gift-giving season of Diwali, the biggest Hindu holiday. Economic growth forecasts have been slightly lowered.

At twilight on last Thursday, Ashok Kumar, 61, sat behind the counter of his family-owned shop, Gulshan Electronics, dejectedly watching television. The shop should have been bustling with customers two weeks before Diwali. Toasters and rice cookers should have been flying off the shelves; in more normal times, families might have indulged in a new television set, or a DVD player. But not now.

"I don't know why. The customers are not there," Kumar said. "It seems Diwali is postponed." Like his fellow shopkeepers at the upscale Khan Market, Kumar was trying his share of holiday gimmicks: buy a 32-inch television, get a satellite dish free. Nothing was working. Kumar blamed the fall in stock prices. The bomb blasts last month across Delhi have not helped.

Only a few months ago, recalled Sanjeev Mehra, who runs a toy store in the same market, customers were eagerly slapping down their credit cards, which have become ubiquitous in India only in recent years. Now, it seems, everyone is wary of piling up debt.

Similarly, the downturn in the aviation industry comes just as the sector was prospering on the growth of a new middle class that could afford to fly for the first time. The number of passengers had more than tripled since economic reforms in 1991, rapidly increasingly year after year, until last June, when it began to slip.

Ragini Chopra, the spokeswoman for Jet Airways, said the airline's fortunes sagged with the rise in fuel prices and then plummeted with the financial crisis over the last month.

"The final nail in the coffin was the banking-sector imbroglio," she said. "That has really taken a toll on the stock market, on corporate sentiment. Everyone has cut down on travel." That warning came as little consolation for Esha Puri, 22. She had worked at Jet for eight months, she said, and had made good money and felt good about herself. "It was a wonderful, glamorous life," she said. "We used to go shopping every day."

With the airline's decision to reinstate the workers, Puri has that life back, for now, and with it her dreams. Late last Thursday night, the Jet chairman, Naresh Goyal, held a news conference and declared he would reinstate the workers.

"The management will have to understand sometimes in a family there are disagreements but the father of the family decides," Goyal said.

New York Times