rec cession in india

8/7/2019 Rec Cession in India

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Agenda

What is Recession

Why Recession happens

Recession in brief Affect around the Globe

Impact on Indian Economy

Corrective Measures Conclusion


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RECESSION

A decline in a countrys real GDP, or

Negative real economic growth for 2 or more

successive quarters of a yearA phase also characterized by unstable stock

markets and fear, pessimism & lack of

confidence in the economy.


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Why Recession happens?

Over production

Low confidence level

A school of thought blames it on Higher

Savings and Less Expenditure


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Recession in Brief

US is suffering from the worst financial turmoilsince the Great Depression

Reasons Sub-prime Crisis, Rising Oil Prices,Etc

Tremors of the slowdown felt all over the

world In September 2008, US was officially

announced to be in Recession.


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Affect around the Globe

Globalization

Dependency of developing countries on theDemand generated from high spendingcountries like US has increased

Huge money (some trillion $)of various FI andIB are invested in these developing economiesthrough direct investment and share market.


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Cont

When these FI`s & IB`s started feeling liquidity crunch,they started withdrawing money from developingcountries

With a slowdown in US market many in developingeconomies started feeling pinch of cash in their market

This is the beginning of slowdown in other financialmarkets in the world

Along with slowed down US market many FI`s and IB`sstarted withdrawing money from these developingnations to save there business at home has added fuel toliquidity crunch


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Impact on India

A slowdown on Us economy is bad news for India because:

India a major player in the shuttle of Globalization

Indian companies have major outsourcing deal from the US

Indias exports to the US have also grown substantially overthe years

Indian companies with big tickets deals in the US are seeingtheir profit margins shrinking


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Anatomy of the economic depression

in India

Share market More people have sold the shares in Indian Share Market

than they bought. This added to the fall index of BSE & NSE

FI have pulled out from stock markets leading to heavylosses in stock and mutual funds

Drastic layoff in many industries

Because of such uncertainty many people saved money inbanks rather investing


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Impact Contd

Govt. & Pvt. companies were reluctant in

starting new projects and ventures

Demand Curve fell sharply Sales of Car, Bike & Truck declined

Steel and Other Industries cutting down

production Hospitality, Tourism & Airlines affected

severely


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Although India is expected to grow, India has not been able to remain

insulated. The impact was strongly felt in Oct-Dec 2008-09 and became

stronger in Jan-March 2009.

Figure: India's Export Growth: Quaterly

Comparisons

-40.0

-20.0

0.0

20.0

40.0

60.0

Apr-June

Jul-Sep

Oct-Dec

Jan-Mar

Apr-June 34.5 23.6 20.5 37.4

Jul-Sep 32.4 30.8 19.2 25.6

Oct-Dec 22.5 20.5 33.0 -13.5

Jan-Mar 10.8 16.4 41.9 -27.7

2005-06 2006-07 2007-08 2008-09


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Corrective

Measures


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Measures To Reduce The Impact Of

Recession

Govt. & RBI tried to tame the recession by the

controlling the two instruments

Fiscal policy

Government influences the economy by changing how it

spends and collects money

Monetary policy RBI manipulates the available supply of money in the

country


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Measures..

Fiscal policy

Tax cuts for businesses or for individuals

More Spending by Govt. to create jobs

Automatic fiscal policy; Unemployment Insurance

Monetary policy

Reduce the reserve ratio

Lower the interest rate

Encourage banks to lend loans to people

.


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Contd..

As of now Government has taken many concrete fiscalmeasures to boost the economy

Import duty on Steel, Iron and some other metals has

been increased by 5 to 20% to make import of theseitems costlier

Government through some central agencies trying toincrease FII`s & FDI fund flow in India as well as attractingNRI money

The monetary measures includes reduction in CRR by 350bps, Repo by 150 bps and reduction of SLR to 24% from25%


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Conclusion

Banking system is in a sound state

Steps taken by the govt. have shown positive response

Inflation well under control Stock markets have stabilized & improved substantially

Steps to reduce the fiscal deficit

Increase in PPP due to 6th pay commission

Indias growth rate still one of the highest in the world


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Contd..

Monetary measures a blessing for producers & consumers

Companies are registering high profit in last quarter e.g Tata Motors, Infosys, Hero Honda

Recruitment by companies have started at large in manypremier institutes

Measures taken to improve tourism & encouraging export

Efforts on setting up of SEZ and increase in FDI

High business in overseas market e.g RBI purchasing 50% ofgold from IMF

.


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Thank You

rec cession in india

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