Economic Recession by Vicky

8/14/2019 Economic Recession by Vicky

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ECONOMIC RECESSION

WITH SPECIALREFERENCE OF INDIA , U.S

& CHINA Presented by . Vijendra

Ahilasha

Vikas


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OUTLINE OF

PRESENTATIONWhat is recession

What causes recession

Recession opportunity or disaster

U.S crises hits India

Crises in U.SEffect on India

How to come out the recession

Factors helping India to ride this recession

conclusion


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WHAT IS RECESSION ?

The term recession is generally used to

describe a situation in which a country's

GDP, or gross domestic product, sustains a

negative growth factor for at least 2

consecutive quarters.

GDP = consumption + gross investment + government

spending + (exports imports)


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What is Recession ?

Contraction phase of business cycle.

National Bureau of Economic Research (NBER)

They define recession as :

Significant decline in economic activity lasting more than afew months, which is normally visible in real GDP, realincome, employment, industrial production, and wholesale-retail sales.

For this reason, the official designation of recession maynot come until afterwe are in a recession for six monthsor longer.


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What causes Recession?

Economic contraction after expansion.

less belief in economy & spend less

Decrease in demand Production, unemployment.

Investers spend less stock market crash


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continue

Bad investment

War

Change in nature of business cycle due to

globalization.

Current global recession is caused by a severe

financial crisis triggered in western developed

economies.

F

actors that stunt short term growth in the economy,

such as a sharp increase in OIL PRICES;


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Act for money balancing in

economy

Federal

reserve

Changing the interest

rates Short term

growth

Balanced or

favourable

result

Unbalanced or

unfavourable result

GDP growth Economic

recession


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RECESSION OPPORTUNITY OR

DISASTER

Developed countries are less prepared to face the crisis,

with their low GDP growth, stagnant domestic market.


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Crisis In The US

Housing market correction, subprime mortgage crisis

Decline in dollar value

63,000 jobs lost in February

In September, 159,000 jobs were lost.

6.1% unemployment rate.


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US Crisis Hits IndiaUS Crisis Hits IndiaUS Crisis Hits IndiaUS Crisis Hits India

US faced major crisis because of Subprime mortgage crisis (homeloan defaults)

Rising oil prices at $100 a barrel Global InflationHigh unemployment ratesA declining dollar value

All this slowed down the growth of the economy

and as the GDP growth rate fell to 2%, recession

set in.


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EFFECT ON INDIA

Job uncertainty

Share market crises

Money depreciation

Price decline of Real state

Drop in international trade

Drop in demand of goods & services


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Governments have 2 policy instruments

Fiscal Policies(By Govt.)

Monetary Policies(By Central Banks)

Governments in Market economies do not have

direct control on Producers & the Consumersbehavior; But, they can influence millions of Producers& Consumers with Governments policies;

Governments influence theeconomy by changing howThe Governments spendand collect money

Central Banks manipulatethe available supply ofmoney in the country

How to come out of recession


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How to come out of recession?

] Reduce reserve

ratio

More moneyavailable for bank

to give loans

Demand picksup; Market

can recover;3] Use its own

reservedmoney to buy

Govt. bonds

It becomes anincome to Govt.to inject money

into the market

Central Bank manipulates the available supplof money in the countryMonetaryPolicies

2] Lower theinterest rates

Individuals takemore loan


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How to come out of recession?

Government influences the economy by changihow it (Government) spends and collects mone

1] Tax cuts forbusinesses or

for individuals

More moneyavailable forspending

Demand picksup; Market

can recover;

2] More Spendingby Govt. to

create jobs

Individuals getsalary and spend

money

3] Automaticfiscal policy;Unemployment

Insurance

Some income tounemployed

people to spend

FiscalPolicies


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INDIAN CONCERN ON RECESSION

India always ready to face such type of crisis?

Terrorist attacks, & share market crisis has made us

used to of facing disasters..

Indian social & political system is more flexible as itabsove any kind of jerk coming to it.

45 to 55 % of the indian population has still not get

connected with the globalization era .


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Factors helping India to ride this

Recession?

India will surely be affected by the crisis but

at the same time, it will be the first country to

emerge stronger with a solid foundation ofsustained growth.

There are few good reasons for riding this

recession - -


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1.-Foreign Direct Investment(FDI)

Years % of GDP

2000-01 0.60

2001-02 0.85

2002-03 0.61

2003-04 0.44

2004-05 0.54

2005-06 0.69

2006-07 0.84

2007-08 1.32

10th largest economy

3rd in PPP(Purchasing Power Parity)

$16 billion FDI in 2006-2007 and

$20 billion in 2007-08.

Highest returns on FDI

Strong English language


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2.- Exports

India Years Export as % of GDP

2000-01 9.68

2001-02 9.17

2002-03 10.39

2003-04 10.65

2004-05 11.92

2005-06 12.75

2006-07 13.79

2007-08 13.92

less dependency on exports

Half a million jobs in India

and 20 million jobs in chinalost.


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3.- Consumption

35% of GDP in China while 65% of GDP in India.

Per capita income of $3,300 at PPP and $714 at nominal.

300 million strong middle class and another 700 million

people is gradually increasing. Indian GDP growth rate about 9% to about 6% in 2008-09

while 13% to 6% in China.


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4.- Sixth pay commission Government has recently handed over a

pay hike that ranges from 40% to 100%.

Employees will get hundreds of thousands

of rupees as Arrears.

5 .- Welfare Schemes

National Rural Employment GuaranteeProgram ( NREGP)


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6.- Interest RatesThe PLR rate is still more than 12% and

its was 16% in mid 1990s.

More than 7% of average GDP growth

rates of the last decade come after high

interest rates in India.


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7.- Healthy Banks Europe and US banks have become

habitual for once mighty and then report

losses.

Analysts are deeply worried about

Chinese banking system.

But no comments from western analysts

and their ilk about Indian Banks.


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8.- India Inc

Advantage compared to China bcz of 2 reasons

1.Most successful India companies are private.

2.Capital for more productivity . Sitting on billions of dollars of reserves.

AMI(Access Market Information) said SME channel partners

expect 12-13% growth in 2009.


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9.- Democracy

largest democratic county

democratic govt. is better than an authoritarian or

autocratic . India 75th in Forbes best nations for business.


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GOLDEN OPPORTUNITY FOR INDIA

emerging economies are dynamic

as their GDP is expanding, the

domestic market is growing and

the financial system is in a sound

condition.

The developing countries

therefore are most likely to be the

engine of global economic growth

in the decades to come


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CONCLUSION

References

Google searchengine

McKinesy reports

Economics times

World economicsforum


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Documents

Economic Recession by Vicky