Recession

and our
Role

Simple tips for employees during recession times

 Introduction_Market Economy
Before understanding the “Recession”,we need to understand
the market economy.There are two stages of market
economy,

1. Growing market economy

2. Declining market economy

And two factors of market,

1. Demand
2. Supply

Simple tips for employees during recession times

 Growing market economy

Simple tips for employees during recession times

 Declining market economy

Simple tips for employees during recession times

 Two factors of market_Demand and Supply
PRODUCER always wants his demand of his product to be HIGH cost
CONSUMER always wants his buying cost to be LOW

Demand :Actual demand is the price at which consumer is ready to

buy,and Producer is ready to sell.Here it is not as the quantity.
Because,
Price decides the Quantity of Sales;
Competitive Price = More Demand;
In-competitive Price = Less Demand

• Producer's Demand

• Consumer Price
Simple tips for employees during recession times
 Recession
 What is Recession?
In economics, the term recession generally describes the reduction
of a country's Gross Domestic Product (GDP) for at least two
quarters.

Simple tips for employees during recession times

 What is GDP?  Gross Domestic Product

Definition : The monetary value of all the finished goods and

services produced within a country's borders in a specific time
period, GDP is usually calculated on an annual basis. It
includes all of private and public consumption, government
outlays, investments and exports less imports that occur
within a defined territory.

GDP = C + G + I + NX
1. "C" is equal to all private consumption, or consumer spending, in
a nation's economy.
2. "G" is the sum of government spending.
3. "I" is the sum of all the country's businesses spending on capital.
4. "NX" is the nation's total net exports, calculated as total exports
minus total imports. (NX = Exports - Imports)
Simple tips for employees during recession times
 India’s GDP
In 2008-Q3 India’s GDP slump down to 5.3%

Simple tips for employees during recession times

 Recession and Depression

There is a joke that economists quote to explain the

Difference between “Recession & Depression”

RECESSION
= WHEN YOUR NEIGHBOR LOSES HIS JOB

DEPRESSION
= WHEN YOU LOSE YOUR JOB

Simple tips for employees during recession times

 Causes of Recessions

1. Currency crises  Frequent change in international currency rate.

2. Energy crisis  Usually refers to the shortage of oil and additionally to

electricity or other natural resources of energy.

3. War  Ruins the country property.Refers and relate to economy.

4. Under consumption  Insufficient consumer demand relative to the

amount produced

5. Overproduction  Excess of production over consumption.

6. Financial crisis  Some financial institutions or assets suddenly lose a

large part of their value.
 Effects of Recessions

1. Credit crunches Banks may suddenly stop or slow lending activity.

2. Bankruptcies Bankruptcy typically involve concealment of assets,

concealment or destruction of documents, conflicts of interest, fraud
claims and false statements or declarations.

3. Deflation Persistent decrease in the general price level of goods and

services.

4. Foreclosures Legal and professional proceeding in which a lien holder,

usually a lender, obtains a court order of redemption.

5. Unemployment when a person is available to work and currently seeking

work, but the person is without work.
 Current Markets condition
o We all know that markets have slumped.

o We read about job-loses in news papers.

o People talk about atleast 24 months of recession.

o Early entrants are not getting jobs.

o Companies are closing.

o Sales are not picking up.

o Suddenly cash has evaporated from the market.

Simple tips for employees during recession times

o Profitability is seriously hit.
 How to come out of Recession?

It is unhealthy for any nation to be in Recession;

So, Government will take certain countermeasures to
eliminate or reduce the effect of recession for
turnaround;

Important Point : Today, it is a market Economy,

*Producers can produce and can sell at their prices and
Consumers;can decide to buy or not…

Here both Producers and consumers are free to

act without forced action.

Simple tips for employees during recession times

 Government Plans against the Recession?
Hence, Government does not have direct control on
Producers’ & the Consumers’ behavior; But, they can
influence millions of Producers &Consumers with
Government’s policies;
Government has 2 plans

Fiscal Policies Monetary Policies

(By Govt.) (By RBI)

Government influences the RBI manipulates

economy by changing how the available supply of
it (Government) spends money in the country
and collects money
Simple tips for employees during recession times
 Govt control through RBI
Repo Rate: Repo rate is the rate at which the banks can borrow
money from a central bank of the country in order to avoid
shortage of funds. It is also a financial & economic tool in the
hands of government to control the availability of money
supply in the market by altering the repo rate from time to
time.Current repo rate is 5.0 %.

Reverse Repo Rate :Reverse Repo rate is the rate at which

Reserve Bank of India (RBI) borrows money from banks. Banks
are always happy to lend money to RBI since their money are
in safe hands with a good interest. Current rate is 3.0 %.

CRR :Cash Reserve Ratio is the amount of money that the banks
have to necessarily keep with the RBI.The RBI pays the interest
on the amount kept with it. Current CRR rate is 5.0 %.
Simple tips for employees during recession times
 Govt_Fiscal Policies
See the flow :

Fiscal Government influences the economy by changing

Policies how Government spends and collects money

1] Tax cuts for More money

businesses or available for
for individuals spending

2] More spending Individuals get Demand picks

by Govt. to salary and spend up; Market
create jobs money can recover;
3] Automatic
Some income to
fiscal policy;
unemployed
Unemployment
people to spend
Insurance
Simple tips for employees during recession times
 Govt_Monetary Policies
See the flow :

Monetary Government manipulates the available supply

Policies of money in the country

More money
1] Reduce CRR
available for bank
for banks
to give loans
Demand picks
up; Market
2] Lower the
Individuals take
can recover;
Repo & Reserve
more loan
repo rates`
Simple tips for employees during recession times
 What about India in global market crises

Most of the developing Currently, GDP Growth

economies like China, Slow Down Rate Down; But,
India; Stage; Not yet Still expected to be
in Recession Around 6% in India

Most of the developed

economies like US, Currently, GDP Growth
Japan, Germany, etc in Recession Rate Negative;

Simple tips for employees during recession times

 Don’t worry
What goes down will always go up, Markets will
rebound – these tips will prepare you to be a
winner !!

HOPING THIS TIME RECESSION VANISHES SOON SO THAT

INDIA GETS BACK TO ITS STRONGER
GDP GROWTH RATE OF 8% TO 10% .

Simple tips for employees during recession times

Simple tips for employees during recession times