What is RECESSION??
In economics, the term recession describes the
reduction of a country’s gross domestic
product(GDP) for at least two quarters.
The usual dictionary definition is “ a period of
reduced economic activity”.
National Bureau of Economic Research(NBER) is
the official agency in charge of declaring that the
economy is in a state of recession.
They define recession as:
“significant decline in economic
activity lasting more than a few
months, which is normally
visible in real GDP, real income,
production and wholesale retail
Causes of RECESSION
Recruiting skilled employee
Low cost work force
Mistakes or the wrong decision can be analyzed
Enough time to maintain work life balance
Household income decreases
Business profit decreases
Buying capacity decreases
Demotivation in people arises
Living standard of people decrease which tends to
-Unhealthy living environment
-Unhygienic and low grade edibles demand increases
It can be divided into two categories :
1- Opportunities to public
Goods and services are available at lower cost
Slash in the price of real estate
Investment become easy
2- Opportunities to organization
Bureaucracy and politician becomes more co-operative
The efficient workers are able to survive in the
organization, these in turn leads to increment quality
goods and services
The remunerations , other expanses are decreased which in
turn increases the saving
Policies become flexible
High unemployment & job cutting rate
Bankruptcies & black money circulation increases
Inflation increases & GDP decreases
Crime graph increases & research rate decreases
Productivity decrease & dumping of product increases
The global contraction from December 2007
to June 2009 that resulted in the world
economy shrinking for the first time since
The great recession was an ongoing market
global economic decline that began in
Dec.2007 and took a particularly sharp
downward turn in Sept.2008.
Causes of The Great Recession
Risk taking behavior
Excessive private debt levels
Some major events of the Great
October 9, 2007 - The Dow Jones
Industrial average reaches an all-time
high of 14,164.53 points.
December 1, 2007 - The recession
officially begins. The unemployment
rate stands at 5%.
February 13, 2008 - President George
W. Bush signs the Economic Stimulus
Act of 2008, which gives individuals a
tax rebate and encourages business
March 16, 2008 - Brokerage firm Bear
Stearns collapses and is bought out by
September 15, 2008 - Lehman Brothers files the largest bankruptcy case in
October 6 - 10, 2008 - The US government unveils a massive rescue
package for Citigroup.
December 9, 2008 - The government bails out General Motors and
Chrysler, offering an initial $13.4 billion from the TARP fund.
January 16, 2009 - The government unveils a huge package for Bank of
America, which includes $20 billion in bailout money and $100 billion in
February 17, 2009 - President Obama signs into law a $787 billion stimulus
package that includes tax cuts and money for infrastructure, schools,
health care, and green energy.
March 9, 2009 - The dow hits the low point of the recession, closing at
6,547 - down nearly 54% from its October 2007 high.
June, 2009 - The recession officially ends after 18 months, making it the
longest downturn in post war history.
October 2, 2009 - The unemployment rate peaks at 10%, hitting double
digits for the first time in 26 years.
Reduction in savings
Sales are not picking up
Suddenly cash has
evaporated from the
Profitability is seriously
Effect of The Great Recession on
1.Investments in India in different types of policies of LIC and other
2. Savings Rate in India
Source: Commerce Department, Bureau of Economic Analysis
3.Consumer Confidence Index
Source: Hindustan times
4.India’s unemployment rate
Source : Department of Labor
How to come out of recession?
It is unhealthy for any nation to be in Recession. So, government will
take certain countermeasures
to eliminate or reduce the effect of recession
Government has 2 plans
Government influences the
economy by changing how
it (Government) spends
and collects money
the available supply of
money in the country
1] Tax cuts for
Some income to
people to spend
1] Reduce reserve
available for bank
to give loans
2] Lower the
3] Use its own
money to buy
It becomes an
income to Govt.
to inject money
into the market
Promoting people to purchase and invest in the
More Spending by Government to create new jobs
Attractive policies for the people having cash reserve
Cut down in labor size
Cutting down loan interests and promoting them
Organizing investors summit
Bringing old closed public mills to the functioning
There is a panic among investors & they are rushing to
get out of risky assets like stocks.
As the outcome of all these development the demand
for gold has increased.
As gold is seen as a safe haven, its price has risen to
The industries are sensitive to high interest rate.
The RBI & our Government is prepared for any
repercussion in the financial market
RBI’s Power or Government’s Power is double-edged
sword; Sometimes, their policies to recover from
recession can be counter-productive and it may further
worse in the situation.
Nation’s recession is controlled by the actions of
everybody living in that country.