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GLOBAL ECONOMIC MELTDOWN
“Repercussions, Challenges and Reforms”
IMPACT ON TRADE, INDUSTRY AND BANKING
SECTOR
The Economic Heat The large outsourcing company
Wipro dismissed 2.5 percent of its work force in the second quarter.
Interest rates jumped from 6% to 15% making impossible for businesses and households to service their bank borrowings
“Liquidity crises" in the market.
The Jordanian capital Amman is facing the brunt of the meltdown and preparing for the worse.
It's a recession when your neighbor loses his job; it's a depression when you lose yours.
Harry S. Truman
The Global Economic Meltdown Economic recession is an
indicator of an economic downturn
A recession is a prolonged period of time when a nation’s economy is slowing down, or
contracting. This slow-down has to
continue for at least six months to be considered a recession.
The Business Cycle
Its Effects Includes high oil prices which led to drastic high food prices
A substantial credit crisis leading to the drastic bankruptcy of large and well established investment banks and commercial banks
Increased unemployment
Slump in personal income
An unhealthy stock market
“Recession – The ultimate Financial Checkpost”
IMPACT ON TRADE, INDUSTRY AND BANKING SECTOR
Trade – The World Connector Trade is the willing exchange of
goods, services , or both
The original form of trade was barter, the direct exchange of
goods and services.
Types - Bilateral and
Multilateral
Various Innovations in Trade
Significance of Trade Trade promotes peace among nations It encourages exchange of ideas and encourages new inventions. For example,
China or any other country does not need to reinvent light bulbs. Increasing global trade encourages small countries to adopt the language of a larger
trading bloc
Factor price equalization Increase in GDP of a nation More Trade, Less poverty Promotes Industrial growth
Meltdown in Trade The Great Depression was a
major economic recession that ran from 1929 to the late 1930s, where a drop in trade and other economic indicators.
The nation's trade deficit fell in December to a six-month low of $6.25 billion
The China-U.S trade gap was $25.9 billion in October
The trade deficits of recent years, which peaked at 5.8% of GDP in 2006
The Indian Side-effects Decline in export growth to negative 9.9%
is a reflection of coupling of Indian exports with global slowdown
Recession Infects the Indian Textile Industry since almost 50% of the total textile production is being exported to US and EU.
India's merchandise exports during October were valued at $12.8 billion, 12 percent lower
India 2007 Gold imports seen at record levels (A positive impact)
Oil imports during December 2007 were valued at 5.96 billion dollars, u 23.78 per cent from 4.81 billion dollars in
2006.
Industrial Sector: The Needs Producer An industry is the manufacturing
of a good or service within a category
Secondary Sector, which is a type of economic activity involved in the manufacturing of raw materials into goods and products.
Key Industrial Sectors Primary sector Secondary Sector Tertiary Sector Quaternary Sector Quinary Sector
Industrial Meltdown: An Impact Recession trickles India’s Tech Industrial
Outsourcing Industry on the edge- Wipro dismissed 2.5 percent of its work force Chemical Industry on the Decline A pang in the Employment
Banking Sector: The Money Circulator A banker or bank is a financial
institution whose primary activity is to act as a payment agent for customers and to borrow and lend money.
conducting current accounts for his customers
paying cheques drawn on him, and
collecting cheques for his customers.
The Money that Never Was
You earn a salary of Rs.50,000 Buy a house worth 20 Lac Assume that you will sell the
house at 40 Lac and make a 100% profit
Not able to pay monthly EMI of Rs. 8,500
Sell the house at a loss File for Bankruptcy
“Money is the Creator of Profit and
Destroyer of the same”
Weakening of the US Dollar
Modern Day Banking in Trouble Merrill Lynch and Citigroup – borrowed funds from Asia & Middle East to the
tune of $6.6 Billion and $14.5 Billion respectively to cover financial losses. The Great Fall of Lehman Brothers: Banks lead fallers in London's worst day in
years FTSE 100 index falls more than 5% Reserve Bank of India Raises Interest rates: Repurchase rate lifted to 8.5 percent
from 8 percent, and cash reserve ratio to 8.75 percent from 8.25 percent.
Global Economic Slowdown: A Boon or A Bane?Boon: India's provisional gem
and jewelry exports increased by 22.27%
Manufacturing production is expected to increase 1.9 percent
Servive sectors grow faster during recession
Bane: American International
Group (AIG) - $5 Billion loss
More than 200 troubled banks are likely to be purchased before they reach the point of failure.
A great hurdle for the IT Industry
Result of Crashing Oil prices
First Hand Information Shasun Chemicals & Drugs Ltd,
Chennai: “The high commodity prices during
the 1st 10 months of calendar year 2008did impact our margins
focusing on cost management, working capital improvements and growing our research and formulation business
We also expect the RBI to bring down the foreign currency volatility”
The Way Out of the Labyrinth- A Solution Increased subsidies by the Government for
promotion of Exports Promotion of Increased Industries in
Service sector Constant check on devaluation of
Currency Don’t bite off more than you can chew Save at least 5% of the monthly income Wipe out credit debts
Conclusion
As a fall in the ditch would make us more cautious, similarly the Global Economic Meltdown has made the World Economy to arise, in spite of its drastic impact. The recovery of the affected sectors – Trade, Industry and Banking has been proved rapid and expected to ensure economic wealth.
By,
Vaishnavi.K Bhavani.K
Sri Arabhi.G