Financial Crisis- Kgp

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Thefinancial crisis of 20072009 has beencalled the most serious financial crisissince theGreat Depression by leadingeconomists,withitsglobaleffects characterized by the failure of keybusinesses,declinesin consumerwealthestimatedin the trillions of U.S. dollars,substantial financial commitmentsincurred bygovernments,andasignificant declineineconomic activity. Many causeshave beenproposed,with varyingweight assigned byexperts. Both market-basedandregulatorysolutionshave beenimplemented orare underconsideration, whilesignificant risksremain fortheworldeconomy.The U.S. faceagreatrecessionduring 1957-58.


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What is RECESSION ?

Many individual countries are now in

recession, and the world economy is flagging badly.Leading economic organisations and businessleaders are talking about "a global recession".

RECESSIONS are theresult ofreductionin thedemand ofproductsin theglobal market. Recessioncanalso beassociatedwith fallingprices knownas

deflationdue to lack ofdemand ofproducts. Again,itcould be theresult ofinflation ora combination ofincreasingpricesandstagnant economic growth.


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Even fornationaleconomies theword

"recession" has more than one meaning.

It canapply to two consecutive quarters ofdeclining output (GDP),adeclineinannualGDP, orin the case of the US,it is the

judgement ofa committee ofeconomistsat

the National Bureau of Economic Research.


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The global financial crisis, brewing for a

while, really started to show its effects in the

middle of 2007 and into 2008. Around theworld stock markets have fallen, large

financial institutions have collapsed or been

bought out, and governments i n even the

wealthiest nations have had to come up withrescue packages to bail out their financial

systems.


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Theglobal financial crisis, brewing forawhile,

really started to showitseffectsin the middle of

2007 andinto 2008.

A global financial meltdownwillaffect the

livelihoods ofalmost everyoneinanincreasinglyinter-connectedworld. large financialinstitutions

have collapsed or been bought out. TheworldStock marketsactivities falldown to thedecline

stage..it may cause to unemployment, businessexpansionstops,income,expenditureandprices

are fall.


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Many factorsdirectly andindirectly caused theongoingFinancial crisis of 2007-2009,also knownastheSubprime mortgage crisis,withexpertsplacingdifferent weights uponparticular causes. The

complexity andinterdependence of many of thecauses,aswellas competingpolitical,economic andorganizationalinterests,haveresultedina varietyofnarrativesdescribing the crisis. One category of

causes createda vulnerable or fragile financialsystem,including complex financialsecurities,adependence onshort-term funding markets,andinternational tradeimbalances. Other causesincreased thestress on this fragilesystem,suchashigh corporateand consumerdebt levels.

Causes of the FinancialCrisis of 2007-2009


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Some causesrelate to particular markets,suchasthestock market orhousing market,while others

relate to theglobaleconomy more broadly. These mortgagesenticed borrowerswitha below

market interest rate forsomepredeterminedperiod, followed by market interest rates for the

remainder of the mortgage's term. Borrowerswhocouldnot make thehigherpayments once theinitialgraceperiodendedwould try to refinancetheir mortgages.

Refinancing became moredifficult, oncehouseprices began to declinein many parts of the USA.Borrowerswho found themselves unable toescapehigher monthly payments by refinancingbegan to default


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Impact of global recession

Impact ofglobalrecession on India

Americais the most effected country due to

globalrecession,which comesasa badnewsfor India. Indiahave most outsourcingdeals

from the US. Even ourexports to US have

increased over the years. Exports for January

declined by 22 per cent..


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GRAPHICAL REPRESENTATION OF RECESSION AFFECTED ECONOMY


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Effects on the global economy

Unemployment increases . Banks curtail credit.

Sharp contractionin bank credit.

Decrease theeconomy by bringingdown theincome,expenditure,prices,andprofit.


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Measures can adopt to tackle

the recession

The following measures can beadopted to tackle the

recession:

Tax cutsaregenerally the first stepanygovernment takesduringslump.

Government shouldhikeitsspending to createmore jobsand boost the manufacturingsectorsin

the country.

Government should try to increase theexport

against theinitialexport.


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Possibility of a global recession in 2009

According to the IMFs World Economic Outlook, October 8, 2008, theworldeconomy is enteringa majordownturnin the face of the most dangerousshock to rich-country financial marketssince the 1930s. IMF expectsglobalgrowth (measured usingpurchasing-powerparity), to comedown to 3% in 2009,on the verge ofwhat it considers to beaglobalrecession.

The World Bank saidin December 2008 that theglobaleconomy willenterarecession for the first timesince 1982. International tradewilldecline from 2007levels. The bank saidit expectsglobal GDP growth to decline to 0.9% in 2009from 2.5% in 2008. Any globalgrowthrate under 2.0% is tantamount to arecessionaccording to economist David H. Wang. Global tradeisexpected todecline 2.1% in 2009, the first declinesince 1982, onreducedglobaldemandandexport credits.

Germany, Europe'slargest economy, contracted by 0.5 percent in the thirdquarter of 2008,puttingit inrecession for the first timein five years.

Japan's GDP contractedat anannualrate of 0.4 percent from July to September2008, marking thesecond consecutive quarter ofnegativegrowth. Japan'spreviousrecessionwasin 2001,after thedot-com bubble burst in the UnitedStates.[10]


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CONCLUSION

Globalrecession affected the Indianeconomy it

was mostly affected the I.T. sector.

Most of I.T. professionallost their jobs. It partly affected the Indiastock exchanges.


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BIBILIOGRAPHY

THE TIMES..

WIKI PEDIA


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THANK YOU.!!!!

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Financial Crisis- Kgp