Recession & India

8/14/2019 Recession & India

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Recession and India

Presented By

Ajay Kumar Gupta

Roll No. 06, Sec. (A)

ICBM - SBE


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What is Recession ?

A Recession is a contraction phase of the business cycle.

National Bureau of Economic Research (NBER) is the official

agency in charge of declaring that the economy is in a state ofrecession.

They define recession as :

Significant decline in economic activity lasting more than a fewmonths, which is normally visible in real GDP, real income,

employment, industrial production, and wholesale-retail sales.

For this reason, the official designation of recession may not come

until afterwe are in a recession for six months or longer.
http://en.wikipedia.org/wiki/Business_cyclehttp://en.wikipedia.org/wiki/Business_cycle


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What causes Recession?

An economy typically expands for 6-10 years and tends

to go into a recession for about six months to 2 years.

A recession normally takes place when consumers looseconfidence 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-offsand a sharp rise in unemployment.

Investors spend less as they fear stocks values will fall

and thus stock markets fall on negative sentiment.


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Crisis In The US

The United States entered 2008 during a

housing market correction, a subprime mortgage crisis

and a declining dollar value In February, 63,000 jobs were lost, a 5-year record.

In September, 159,000 jobs were lost, bringing the

monthly average to 84,000 per month from January toSeptember of 2008.

On September 5, 2008, the

United States Department of Labourissued a report

that its unemployment rate rose to 6.1%, the highest in
http://en.wikipedia.org/wiki/United_States_housing_market_correctionhttp://en.wikipedia.org/wiki/Subprime_mortgage_crisishttp://en.wikipedia.org/wiki/United_States_Department_of_Laborhttp://en.wikipedia.org/wiki/Unemployment_ratehttp://en.wikipedia.org/wiki/Unemployment_ratehttp://en.wikipedia.org/wiki/United_States_Department_of_Laborhttp://en.wikipedia.org/wiki/Subprime_mortgage_crisishttp://en.wikipedia.org/wiki/United_States_housing_market_correction


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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

Being 10th largest economy in the

World and 3rd in term of

PPP(Purchasing Power Parity), India

has emerged as a potential player forFDI & NRI investment.

$16 billion total amount of FDI that

came to India in 2006-2007 and $20

billion in 2007-08.

India provides highest returns on FDI

than any other country in the World.

India has a strong English language base for business ur oses .


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2.- ExportsIndia 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

World bank Chief Economist

said that more jobs will be lost

in China than India because

India is less dependent onexports and he said also

emerging India is in much better

shape in comparison to other

emerging country.

Half a million jobs have been

lost in India and 20 million jobs

have been lost in China in lastuarter of 2008.


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3.- Consumption

Consumption accounts for just about 35% of GDP in China

while it constitutes about 65% of GDP in India.

India's huge population results in a per capita income of

$3,300 at PPP and $714 at nominal. India has a vast domestic market of 300 million strong

middle class population having a substantial purchasing

power and another 700 million people whose capacity to

purchase is gradually increasing.

Indian GDP growth rate will moderate from about 9% to

about 6% in 2008-09 while it is poised to crash from 13% to

6% in China. Thats why slow and steady is often better.


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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.


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5.- Welfare Schemes

National Rural Employment Guarantee Program

(NREGP) that provides 100 days of employment

to the poor people in rural areas.

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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8.- India Inc

Western scholars acknowledge that India holds the advantage

compared to China because of 2 reasons

2. Most successful India companies are private.

3. They have used capital for more productively and efficiently

than Chinese counterparts.

Most Indian companies are sitting on billions of dollars of

reserves.AMI(Access Market Information) said SME channel partners

expect 12-13% growth in 2009.

$6 millions for MSME programme to help Orissa unit by

UNIDO(United Industrial Development Organization)


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9.- Democracy

India is the largest democratic county in the world.

Thats why the psychological impact on Indian

consumers and investors has been for moresanguine than it has been in others countries.

Business pundits say that democratic govt. is better

than an authoritarian or autocratic one when it

comes to delivering high growth rates and

economic prosperity.

India 75th in Forbes best nations for business.


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References:

o Google search engine.

o McKinsey reports.

o World economic forum

o World social forum

o

Harvard business reviewo Accountancy magazine

o The Economists

04/04/09 15

Ajay Kumar Gupta

Give comment-

[email protected] or 9291592309
mailto:[email protected]:[email protected]


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Recession & India