RECESSION<br />Group 01<br />
2<br />Overview<br /><ul><li>Recession: Prologue & Definition
Causes of Recession
Global Recession
Business Cycle Recession
Impact on Indian Economy
How to come out of Recession
Business Opportunities during recession
References</li></li></ul><li>3<br />The Colours<br />Recession..?<br /><ul><li>Recession is shrinking of the economy for t...
4<br />The Colours<br />  Recession..?<br />Cont..<br />DEPRESSION<br />= WHEN YOU<br /> LOSE YOUR <br />JOB<br />RECESSIO...
5<br />TWO STAGES OF MARKET ECONOMY <br />Growing Market Economy<br />Declining Market Economy<br />
6<br />Growing Market economy<br />
7<br />Declining Market economy<br />
8<br />Why Recession happens?<br />OVER <br /> PRODUCTION<br />LOW<br /> CONFIDENCE  LEVEL<br />PSEUDO DEMAND<br />ACTUAL ...
9<br />Why Recession happens?<br />LOW<br /> CONFIDENCE  LEVEL<br />Word of mouth<br />Assignable Cause<br />Consumers Fea...
10<br />Why Recession happens?<br />LOW<br /> CONFIDENCE  LEVEL<br />Assignable Cause<br />Bad Incidences Happening<br /><...
 Mumbai attack in India</li></li></ul><li>11<br />Terrorists’ Attack on 11th September in US<br />Created fear in people<b...
12<br />Terrorists’ Attack on 11th September in US<br />Airline & Hotel Industries started <br />“Cost Reduction” activiti...
13<br />Ripple Effect<br />The hit on Airline and Hotel <br />Industries affected  “Un-related” industries <br />in the en...
14<br />Global Recession<br />Global Recession: When global growth is less than 3%.<br />                               - ...
15<br />RECESSION AT THE END OF WORLD WAR I<br /><ul><li>Following the end of World War I, the economy went into a brief r...
In fact there were two: 1918-19, and 1920-21.
The 1920-21 recession saw a significant decline in prices.
But the decline in output was relatively mild, and the recession was short, particularly given the decline in prices.
The difference is that people expected prices to decline, so there was a downward shift in short runs aggregate supply</li...
The money supply grew by less than expected.
The effect was to shift aggregate demand down.
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Recession

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What is recession and how it has effected the world economy

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Recession

  1. 1. RECESSION<br />Group 01<br />
  2. 2. 2<br />Overview<br /><ul><li>Recession: Prologue & Definition
  3. 3. Causes of Recession
  4. 4. Global Recession
  5. 5. Business Cycle Recession
  6. 6. Impact on Indian Economy
  7. 7. How to come out of Recession
  8. 8. Business Opportunities during recession
  9. 9. References</li></li></ul><li>3<br />The Colours<br />Recession..?<br /><ul><li>Recession is shrinking of the economy for two </li></ul>consecutive quarters (=6 months) with a<br />decrease in the GDP (=Gross Domestic Product)<br /><ul><li>GDP = Value of all the reported goods and services </li></ul>produced by the people operating in the country<br />GDP = MONEY VALUE OF {C + I + G + (X – M)}<br />C = Consumables, I = Gross Investments, G = Government Spending, <br />X = Exports, M = Imports<br />
  10. 10. 4<br />The Colours<br /> Recession..?<br />Cont..<br />DEPRESSION<br />= WHEN YOU<br /> LOSE YOUR <br />JOB<br />RECESSION<br />= WHEN YOUR NEIGHBOUR LOSES HIS JOB<br />GDP is a good indicator of economy<br /> Other indicators could be:<br /> -Unemployment Rate<br /> -Consumption Rate<br /> -Actual Personal Income<br /> -Etc..<br />If GDP is growing, then market is growing due to increased demand;<br />But If the recession continues for next quarter, (>6 months) then we go through “DEPRESSION” Economy<br />
  11. 11. 5<br />TWO STAGES OF MARKET ECONOMY <br />Growing Market Economy<br />Declining Market Economy<br />
  12. 12. 6<br />Growing Market economy<br />
  13. 13. 7<br />Declining Market economy<br />
  14. 14. 8<br />Why Recession happens?<br />OVER <br /> PRODUCTION<br />LOW<br /> CONFIDENCE LEVEL<br />PSEUDO DEMAND<br />ACTUAL NEED WAS<br />NOT THERE;<br />WRONG PROJECTIONS<br />COMPANIES <br />PRODUCED<br />MORE<br />A situation in which the <br />supply exceeds the nation’s <br />ability to consume what has been produced;<br /> Supply > Demand<br />
  15. 15. 9<br />Why Recession happens?<br />LOW<br /> CONFIDENCE LEVEL<br />Word of mouth<br />Assignable Cause<br />Consumers Fear: Jobs; So, they have less confidence to spend money and buy goods; <br />This will result in reduction<br />in demand in the market; <br />Consumers start saving money instead of spending money; <br />This is a downward spiral in <br />the economy<br />Low Confidence Level <br />of Millions of <br />consumers and <br />producers after- many job cuts, Demand coming down, Companies’ bankruptcy, etc<br />
  16. 16. 10<br />Why Recession happens?<br />LOW<br /> CONFIDENCE LEVEL<br />Assignable Cause<br />Bad Incidences Happening<br /><ul><li> 9/11 attack on WTC
  17. 17. Mumbai attack in India</li></li></ul><li>11<br />Terrorists’ Attack on 11th September in US<br />Created fear in people<br />People cancelled their travel plans<br />Resulted in low occupancy rates<br />Airlines & Hotel Industries badly hit<br />Airline & Hotel Industries offered discounts, <br />gift coupons, to attract people<br />But, still, no improvement in occupancy <br />rate<br />Airline & Hotel Industries started <br />“Cost Reduction” activities<br />
  18. 18. 12<br />Terrorists’ Attack on 11th September in US<br />Airline & Hotel Industries started <br />“Cost Reduction” activities<br />ii] Lay off people<br />i] Reduce No. of flights<br />iii] Salary reduction to<br />“Not laid off people”<br />Low or No income to <br />spend and buy goods<br />In flight meals reduced<br />They became careful due<br />to the fear of loss of job<br />Demand for other goods<br />come down<br />Meals supplying company<br />got the hit<br />Started saving money<br />instead of spending<br />Catering company now,<br />lays off people<br />Demand for other goods<br />come down<br />
  19. 19. 13<br />Ripple Effect<br />The hit on Airline and Hotel <br />Industries affected “Un-related” industries <br />in the end<br />One industry can hit many other industries when the <br />confidence level of millions of consumers & producers<br />drastically comes down<br />
  20. 20. 14<br />Global Recession<br />Global Recession: When global growth is less than 3%.<br /> - International Monetary Fund<br />At the end of World War I<br />1981-82<br />1990-91<br />2001-02<br />2008-09<br />
  21. 21. 15<br />RECESSION AT THE END OF WORLD WAR I<br /><ul><li>Following the end of World War I, the economy went into a brief recession.
  22. 22. In fact there were two: 1918-19, and 1920-21.
  23. 23. The 1920-21 recession saw a significant decline in prices.
  24. 24. But the decline in output was relatively mild, and the recession was short, particularly given the decline in prices.
  25. 25. The difference is that people expected prices to decline, so there was a downward shift in short runs aggregate supply</li></li></ul><li>16<br />THE 1981-82 RECESSION<br /><ul><li>In 1980, a new Chairman of the Federal Reserve System, Paul Volker, determined to end the inflation, by cutting the rate of growth of the money supply.
  26. 26. The money supply grew by less than expected.
  27. 27. The effect was to shift aggregate demand down.
  28. 28. If people had changed inflationary expectations, the recession would have been moderate.</li></li></ul><li>17<br />THE 1990-91 RECESSION<br /><ul><li>Economists disagree over the causes of the 1990-91 recession.
  29. 29. The end of the Gulf War and the Cold War brought reduced government spending on the military, thus shifting the aggregate demand curve to the left.
  30. 30. At the same time, banks became concerned about their liquidity, giving the S&L crisis at that time.
  31. 31. This too caused the shift in the Aggregate Demand curve.</li></li></ul><li>18<br />THE 2008-09 RECESSION<br /><ul><li>Started in December 2007 in the US.
  32. 32. Started showing its true colors in September 2008.
  33. 33. Happened due to reckless and unsustainable lending practices.
  34. 34. Brought down banking and insurance giants like Lehman Brothers, AIG and many more.</li></li></ul><li>19<br /> Least affected countries <br />
  35. 35. 20<br />Impact on Indian Economy<br /> Less severe than in other emerging market economies.<br /> Its been restricted due to several reasons such as-<br /><ul><li>Indian financial sector particularly our banks have no direct exposure to tainted assets and its off-balance sheet activities have been limited.
  36. 36. India’s growth process has been largely domestic demand driven and its reliance on foreign savings has remained around 1.5per cent in recent period.</li></li></ul><li>21<br />Impact on Indian Economy<br />Cont..<br /><ul><li>India’s comfortable foreign exchange reserves provide confidence in our ability to manage our balance of payments notwithstanding lower export demand and dampened capital flows.
  37. 37. Headline inflation, as measured by the wholesale price index (WPI), has declined sharply.
  38. 38. Rural demand continues to be robust due to mandated agricultural lending and social safety-net programmes.
  39. 39. India’s merchandise exports area round 15 per cent of GDP, which is relatively modest. </li></li></ul><li>22<br />How to come out of Recession?<br />Important Point: <br />Today, it is a market Economy<br />Producers;<br />Can produce and <br />sell at their prices<br />Consumers;<br />Can decide to <br />buy or not;<br />Both Producers and Consumers are free to act; Not a forced action<br />
  40. 40. 23<br />How to come out of Recession?<br />Cont..<br />Government does not have direct control on Producers’ & the Consumers’ behavior; But, they can influence millions of Producers & Consumers with Government’s policies<br />Government has two plans<br />Fiscal Policies<br />(By Govt.)<br />Monetary Policies<br />(By RBI)<br />Government influences the <br />economy by changing how<br />it (Government) spends <br />and collects money <br />RBI manipulates <br />the available supply of <br />money in the country<br />
  41. 41. 24<br />How to come out of Recession?<br />Government influences the economy by changing <br />how it (Government) spends and collects money <br />Fiscal <br />Policies<br />Cont..<br />More money<br />available for<br />spending<br />Tax cuts for <br />businesses or<br />for individuals<br />Demand picks<br />up; Market <br />can recover<br />Individuals get<br />salary and spend<br />money<br />More Spending <br />by Govt. to<br />create jobs <br />Automatic <br />fiscal policy;<br />Unemployment<br />Insurance<br />Some income to<br />unemployed <br />people to spend<br />
  42. 42. 25<br />How to come out of Recession?<br />Monetary<br />Policies<br />Government manipulates the available supply <br />of money in the country <br />Reduce reserve<br />ratio <br />More money<br />available for bank<br />to give loans<br />Demand picks<br />up; Market <br />can recover;<br />Lower the <br />interest rates<br />Individuals take<br />more loan<br />Use its own <br />reserved<br />money to buy<br />Govt. bonds<br />It becomes an<br />income to Govt.<br />to inject money<br />into the market<br />
  43. 43. 26<br /> Why a recession is a good time to start a company<br /> A recession forces founders to be frugal. <br /> Recessions force entrepreneurs to take another close look at their ideas. <br /> Recessions lead to committed start-up teams.<br /> Recessions toughen up companies. <br />
  44. 44. 27<br />References<br />http://en.wikipedia.org/wiki/Recession <br />http://www.investorwords.com/4086/recession.html <br />http://www.labnol.org/internet/countries-least-affected-by-economic-recession/8814/ <br />http://en.wikipedia.org/wiki/Subprime_mortgage_crisis <br />King Sarah, Cushman Donald ; Lessons From The Recession: A Management And Communication Perspective<br />Thank You<br />

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