Economic Recession by Vicky
Transcript of 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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