RECENT RECESSION

BUSINESS

Presentation by :-

ANMOL BEHAL
(JALANDHAR)
 CONTENTS

Definitions
Causes of Recession
U.S. Recession
Past Recessions
Impact on India
Was India ever in Recession
How to fight Recession
Steps taken
 BASIC DEFINTIONS
Recession : A recession is a decline in a country's gross domestic product
(GDP) growth for two or more consecutive quarters of a year. A recession is also
preceded by several quarters of slowing down.

Gross domestic product : The total market value of all final goods and services
produced in a country in a given year, equal to total consumer, investment and
government spending, plus the value of exports, minus the value of imports.

Consumption is the sum of expenditures by households on durable goods, non-

durable goods, and services.

Investment :is the sum of expenditures on capital equipment, inventories, and

structures.

Government spending :is the sum of expenditures by all government bodies on

goods, services and infrastructure.

Net export: is the difference between total exports and total imports
Graph showing variation of an Economy with Time
 Causes Behind
An economy which Recession
grows over a period of 6-10 years tends to
slow down the growth as a part of the normal economic cycle for
about six months to 2 years.

A recession normally takes place when consumers lose

confidence in the growth of the economy and spend less.

This leads to a decreased demand for goods and services, which

in turn leads to a decrease in production, lay-offs and a sharp rise in
unemployment.

Investors spend less as they fear stocks values will fall and thus
stock markets fall on negative sentiment.
 SIGNS THAT USUALLY INDICATE
THAT A RECESSION IS KNOCKING

1. The Rate Of Joblessness Assumes Disturbing Proportions.

2. Large Companies Start Giving Depressing Profit Figures.

3. Borrowers Start Defaulting.

4. Credit Card Purchases Shoot Up.

5. Prices Of Essential Commodities Shoots Up.

6. Companies Stop Filling Vacancies.

7.Prices Of Property And Stocks Come Down drastically, But Nobody Buys them.

8. The Country's GDP Goes Down.

9 .Savings Are Used For Day-To-Day Expenses.

10 .You Start Worrying About All Of The Above.

 U.S. Recession
1 ) Banks faced huge shortage of funds and soon
collapsed: As banks kept giving loans and funds at
reasonable terms. At the end of the day, they were
left with nothing. For example - Merrill Lynch,
Lehman Brothers, CITIGROUP INC
 
2 ) Jobs are being outsourced to other countries
while Americans are themselves jobless.
 
 PAST RECESSION
The US economy has suffered 10 recessions since the end of World War II.

1930-1939 :Decade of high unemployment, low profits, low prices of goods, and high
poverty, specially in 1937 the production declined from 14.3% to 19%.

 1982-1983 :Due to a tight monetary policy to control inflation and sharp correction to
overproduction of the previous decade.

1987 : Black Monday in October 1987, when a stock market collapse saw the Dow Jones
Industrial Average plunge by 22.6 per cent affecting the lives of millions of Americans.

1990 : The early 1990s saw a collapse of junk bonds and a financial crisis.

2001 : The US saw one of its biggest recessions in 2001, ending ten years of growth, the
longest expansion on record and employment dropped by almost 1.7 million. The economy
also suffered after the 9/11 attacks. Investors' wealth dwindled as technology stock prices
crashed.

2009 : The economy suffered the recent recession in 2009.

“Our economy is shrinking, unemployment rolls are growing,
businesses and families can’t get credit and small businesses can’t
secure the loans they need to create jobs and get their products to
market, With the stakes this high, we cannot afford to get trapped
in the same old partisan gridlock.”
 Impact on India
1. Reduced liquidity in the Indian economy.
2. Reduced industrial output.
3. Reduced job opportunities.
4. Stock Market is lingering in the bottom .
5. Real estate market has started to take a
beating.
6. Inflation has increased.
7. GDP has come down and the GDP forecast
for the next two quarters are only average.
 Disturbing facts
India economy is likely to lose between 1 to 2 percentage points in GDP
growth.
 
A weak dollar could bring more foreign money to Indian markets.
 
10,000 engineers, 5,000 MBAs , 500 designers 2,000 retail sector
professionals 2,500 aviation sector professionals will b unemployed
 
Lakhs of jobs lost in the last 3 months (in India).

Tata Motors fails to pay vendors, suppliers.

India Inc’s fund raising via IPO in 2008 dips to 3-yr low.

Truck Sales decline by 65%

Value of Rupee depreciating as compared to U.S. Dollar.
 WAS INDIA EVER IN RECESSION ???

The answer is “NO”.

India is not a globalized economy.

India was already facing a huge inflation

problem.

India’s growth is not due to any external

factors.
 Problems in India
A friend will advice to his colleague, “Damn, see US and Europe is into recessions, people are
losing jobs and that India guy who studied in IIT and such a rich fellow. He killed his family
and committed suicide because of bad debts. Maybe we should be careful now. If such big
countries can have problems, how soon do you think we will get into trouble like that? Let us
be careful now. Who knows when we will lose our jobs? Let us save now. We can spend when
time are good. ”
Wife will advice her husband,” listen, don’t buy too much from the stores, ok? We will manage.
I saw TV news about the finance problem. And I heard from my mom that her friend’s son lost
his job. Did you check the share market points today? It was down and in red for the whole
day, yesterday. We have enough for next 2 days. Just buy little “, and for the first time she will
use the word budget … ” Let us have a budget from next month, ok ? ” Sensex & Budget is
words which are new to her dictionary.
Mom will caution her son/daughter (who just joined a firm fresh out of college),” Listen, don’t
go out too much with friends and waste your salary on movies, clothes or jewels. Manage with
what you have. And don’t resign or jump jobs. When you get the first salary. Give half to me; I
will put in your savings. Don’t buy that bike now. Interest rates are high. Buy it after 6 months
”.
 The panic button is on and the story goes on.

Media will use the panic to give you more sensational news
from abroad and get you more worried. It is cyclic.
We start saving a lot more than we should. Hence, money
gets stagnated.
When you don’t buy stuff how are you going to give money
back to the manufactures to produce more? If they don’t
have enough to produce, how are they going to pay your
salary? When they don’t have enough money to pay your
salary, because of no work getting done, why do you expect
them to pay you for nothing and not ask you to leave?

So, as you see. The story is we get sentimental and extra

cautious when we hear the news around us.
 How to fight Recession ?
Govt. should cut down the tax.

Govt should hike its spending to create more jobs.

Boost the manufacturing sectors in the country.

By increasing the export against the initial export.

Can reduce the unrealistic prices of property to bring back

the buyers into the market.

Decline in oil prices will also have a positive impact on the

importers.
As sure as spring
Will follow
the winter,
Prosperity and
Economic Growth
will follow
Recession.
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WATCHING 

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