In an annual communication to $83 billion Tata Group, Chairman Ratan Tata has given a heads up to employees, warning them of tough times ahead, reports said.

Tata has also suggested that expansion plans would depend on the economic situation and that companies would have to undertake cost cutting operations.

“All our companies will need to review and moderate their earlier future projections. Expansion schemes need to be in sync with the current realities. To combat the pressure of higher input costs, each of our companies will need to vigorously pursue reductions in manufacturing and process costs of products with a view to building back margins,” said Tata.

While asking for a reconsideration of projections, Tata also emphasized the need to not be excessively risk averse.

“We must however not be so risk averse that we lose out on the interesting opportunities in various geographies,” Tata’s letter stated.

A ray of hope emerged as unlike in 2008, Tata said that the US and Europe would recover slowly and other countries would provide opportunities to the group.

“I believe that the United States will see a slow recovery. The recovery in Western Europe and the United Kingdom will probably be slower. Asia in general and certain countries in Africa will present interesting, and in some cases, attractive opportunities for us,” he said

Expressing confidence in Cyrus Mistry, who was recently declared as the successor to him after a long search and much speculation, 74 year old Tata said, “I believe Cyrus embodies the attributes required to lead the group in the years ahead.”

The businessman believes that tough times would ‘most probably continue’ in 2012.

Highlighting the conglomerate’s performance in the year gone by, Tata said that the group’s revenue’s had surpassed $83bn boosted by growth in its software major TCS and a pick-up in sales in Jaguar and Land Rover. However, a dampener came from the performance of Tata Steel Europe, which had witnessed a drop in demand for steel in Western Europe.

Speaking about the year gone by in terms of controversies, Tata said, “I'm pleased that in the ‘2G scam', the investigative agencies have stated they have found no evidence of the Tata Group's involvement in the wrongdoings, or conspiratorial action under investigation. The bona fides, ethics and values of the Tata Group have remained intact.”