Recession
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Economic Recession

Economic Recession

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  • GDP = MONEY VALUE OF {C + I + G + (X – M)} <br /> C = Consumables, I = Gross Investments, G = Government Spending, <br /> X = Exports, M = Imports <br />
  • Low Confidence Level <br /> of Millions of <br /> consumers and <br /> producers after they <br /> hear many job cuts, <br /> Demand coming down, <br /> Companies’ bankruptcy, <br /> Etc <br /> Producers do not stock materials, they <br /> reduce their productions, gets into the <br /> cost reduction activities, worried about <br /> the profitability, etc… <br />
  • Consumer spending has been the major driver of the US economy for most of the past 2 decades. For <br /> example, continued consumer spending made the last recession in 2001 a mild one. As real income growth <br /> slowed and consumer debt increased, economists looked for signs that consumer had cut borrowing and <br /> spending. By October such signs were glaringly obvious. In the 3rd quarter GDP estimates real consumer <br /> spending fell 3.7% at an annual rate, the first decline since 1991. The October consumer confidence index <br /> (Conf. Board) reached all time low. <br />
  • November was the worst month in the US labour market since the oil crisis of 1974, as more than 500,000 US workers were laid off, according to official figures released on Friday. <br /> On Friday alone, embattled car firm General Motors, fund manager Legg Mason, and motor parts supplier Gentex announced plans to shed staff. <br /> November&apos;s jobs figures were so much worse than analysts had expected that the Dow Jones share index actually rallied by 259 points, more than 3 per cent, as investors bet that Washington would have to launch a major new rescue package for the economy even before President-elect Barack Obama takes over the White House in January. <br /> The scale of the layoffs in the US, which pushed unemployment to 6.7 per cent, could also point towards a further deterioration in conditions in the UK: David Blanchflower, an independent member of the Bank of England&apos;s Monetary Policy Committee and labour market specialist, warned recently: &apos;What happens in the US tends to be repeated six to nine months later in Britain&apos;. <br /> David Frost, director-general of the British Chambers of Commerce, believes Britain&apos;s companies are gearing up for large-scale layoffs. <br /> &apos;There will be a huge raft of redundancies. I am sensing that talking to firms. The worry is that next year the job losses will be just horrendous. All sectors are taking the hit. In the middle of the year it was construction and estate agencies. Now it is services, the automotive industry, retailers. Firms are waiting for Christmas and if they can&apos;t see any improvement they will cut their payrolls.&apos; <br /> Woolworths administrators made 450 of its office staff redundant on Friday, but the future of the 25,000 staff who work in its stores remains uncertain. <br /> NO.1 Citigroup (73,000)NO.2 Bank of America (35,000)NO.3 General Motors (34,000)NO.4 Hewlett-Packard (25,000)NO.5 Lehman Brothers (23,000)NO.6 AT & T (17,000)NO.7 express delivery company DHL (15,000)NO.8 Of Starbucks (12,000)NO.9 Chrysler (12,000)NO.10 Wells Fargo (11,000)NO.11 Dow Chemical (5,000 employees and 6,000 contractors) <br /> Related posts: <br />
  • The four-week average of applications for unemployment insurance reached last week it’s highest in seven years. A poll for more than 100 financial executives and presidents revealed that 56 percent of them expect to reduce their payrolls for next year. <br /> companies such as PepsiCo Inc. and Danaher Corp. said they would fire thousands of workers to confront the crisis. <br /> Since the recession began, the economy has eliminated about 4.4 million jobs, with about 2.6 million disappearing in the past four months. This rapid deterioration has prompted talk that some industries are being partly dismantled. Layoffs are multiplying because of dysfunction in the financial system, which is prompting even healthy companies to shed workers and shut down operations out of concern that they may soon lose access to credit. <br /> Much the same can be said for financial services, which relinquished 44,000 jobs in February. During the housing boom, banks hired tens of thousands of well-compensated traders, analysts and marketers to sell mortgage-backed securities and other investments. That industry is unlikely to return to its former shape. <br /> As U.S. government data showed that 651,000 more jobs disappeared in February, a sense took hold that rising joblessness could reflect a wrenching restructuring of the U.S. economy. <br /> In important industries like manufacturing, financial services and retail, layoffs have accelerated so quickly in recent months as to suggest that many companies are abandoning whole areas of business. The unemployment rate rose to 8.1 percent, from 7.6 percent in January, its highest level in a quarter century. <br /> Retailers are shuttering stores as the era of easy money fueled by rising house prices and abundant credit gives way to a period in which millions of households are forced to confine their spending to their paychecks. The economy has eliminated more than 500,000 retail jobs in the last year. <br />
  • Low Confidence Level <br /> of Millions of <br /> consumers and <br /> producers after they <br /> hear many job cuts, <br /> Demand coming down, <br /> Companies’ bankruptcy, <br /> Etc <br /> Producers do not stock materials, they <br /> reduce their productions, gets into the <br /> cost reduction activities, worried about <br /> the profitability, etc… <br />
  • In early July, depositors at Los Angeles offices of Indy Mac Bank lined up in the street to withdraw their money. <br />
  • China: The world’s fastest-growing economy can’t help but be affected when the world’s largest economy slows down, since China relies on exports to the United States as one of its main sources of growth. In recent years, China has boasted double-digit growth. Officially, Chinese economists expect growth to slow down to 9 percent in the wake of a U.S. recession, but only if such a recession is mild, lasting two quarters. If the U.S. recession is severe—four quarters or more—and is centered on a faltering U.S. consumer who buys fewer Chinese goods, then China’s growth is likely to slow to 6 or 7 percent, a hard landing, indeed. <br /> Indonesia, Malaysia, Taiwan, and South Korea: China gets raw materials such as timber and rubber from Southeast Asian countries like Indonesia and Malaysia. Other East Asian countries, like Taiwan and South Korea, send component parts to the mainland, which are then assembled into finished products that are shipped to the United States. Both groups of exporters are likely to fall—and fall hard—if a drop in Chinese exports to the United States leads to less Chinese demand for these goods and raw materials throughout Asia. Keep an eye on metals, coal, and food products in particular. <br />
  • Latin America: Chile’s got copper; Brazil’s got minerals; Argentina’s got livestock and feed. They’ll have to scrounge to sell these and other commodities elsewhere if the United States and China isn’t buying as much as before. Prices of commodities could fall by 20 to 30 percent in a U.S. recession followed by a sharp economic slowdown. <br />
  • Mexico and Canada: Living next door to world’s biggest economy has its advantages, but it has big drawbacks, too. Exports to the United States represent about a quarter of each country’s GDP, so direct trade links will bear the brunt of a slowdown. Expect the manufacturing sectors of both countries to feel the pinch. <br />
  • Britain, France, and Germany: As a recession in the United States takes hold, the fall in U.S. demand will mean lower exports by European companies, as well as lower sales and profits for European firms—such as BMW, Unilever, and others—that produce everything from cars to consumer products in the United States. A weaker dollar means that the value—in euros—of European investments in the United States will suffer a major capital loss. High oil prices won’t help, either. And the deflation of housing bubbles in Britain, France, Spain, and elsewhere will slow down growth across the continent. <br /> Estonia, Latvia, Lithuania, Hungary, Bulgaria, Romania: They all run large deficits, are experiencing excessive credit booms and housing bubbles, and have an overvalued currency. If capital dries up because of the global credit crunch, it could lead to deep financial woes for these smaller European economies: Households that borrowed Swiss francs or Euros to finance their mortgages could go bankrupt and, in turn, local banks could go belly up. <br />
  • Japan: The Japanese economy is perpetually anemic, always on the borderline between growth and recession, between inflation and deflation. A deep U.S. recession will likely tip Japan over the edge, and into a recession of its own. Most of Japan’s economic growth in the last few years has been driven by external demand for its goods (such as consumer electronics, cars, etc.), net exports with a weak yen. Domestic private consumption has been weak, as incomes and wage growth have remained flat. And, as one of the world’s largest energy importers, oil hovering at $100 a barrel will make it hard for Tokyo to shake off its economic malaise any time soon <br /> Japan: The Japanese economy is perpetually anemic, always on the borderline between growth and recession, between inflation and deflation. A deep U.S. recession will likely tip Japan over the edge, and into a recession of its own. Most of Japan’s economic growth in the last few years has been driven by external demand for its goods (such as consumer electronics, cars, etc.), net exports with a weak yen. Domestic private consumption has been weak, as incomes and wage growth have remained flat. And, as one of the world’s largest energy importers, oil hovering at $100 a barrel will make it hard for Tokyo to shake off its economic malaise any time soon <br />
  • Japan: The Japanese economy is perpetually anemic, always on the borderline between growth and recession, between inflation and deflation. A deep U.S. recession will likely tip Japan over the edge, and into a recession of its own. Most of Japan’s economic growth in the last few years has been driven by external demand for its goods (such as consumer electronics, cars, etc.), net exports with a weak yen. Domestic private consumption has been weak, as incomes and wage growth have remained flat. And, as one of the world’s largest energy importers, oil hovering at $100 a barrel will make it hard for Tokyo to shake off its economic malaise any time soon <br /> Japan: The Japanese economy is perpetually anemic, always on the borderline between growth and recession, between inflation and deflation. A deep U.S. recession will likely tip Japan over the edge, and into a recession of its own. Most of Japan’s economic growth in the last few years has been driven by external demand for its goods (such as consumer electronics, cars, etc.), net exports with a weak yen. Domestic private consumption has been weak, as incomes and wage growth have remained flat. And, as one of the world’s largest energy importers, oil hovering at $100 a barrel will make it hard for Tokyo to shake off its economic malaise any time soon <br />
  • Cry from average 9% growth of recent years 2003-08 <br /> Growth in 2009 will be 6%, a tad higher than IMF estimate of 5.1% <br /> 6% growth will represent the fastest growth rate in the world after China&apos;s <br />
  • Most people have sold the shares. <br />
  • Bonuses, perks, lavish parties, and other benefits are missing as companies look to cut cost. <br />
  • 2.four per cent cut in CENVAT that will bring down prices of cars, cement, textiles and other goods <br /> 1.rural, infrastructure and social security schemes such as Pradhan Mantri Gram Sadak Yojana (PMGSY), Jawaharlal Nehru National Urban Renewal Mission (JNNURM), National Rural Employment Guarantee Scheme (NREGS), Indira Awas Yojana, Accelerated Irrigation Benefit Programme and National Social Assistance Programme (NSAP). <br />  3.This was again to boost the real estate especially housing industry which is one of the worst affected industries among software and other major export items. <br />
  • 1.MSME medum small and micro enterprises <br /> 2.naPTHA for power sector <br /> 3.Cut on export duty on iron lumps from 15 to 5 <br />
  • 2. by 31/3/2009. to re-finance bank lending of longer maturity to eligible infrastructure projects. <br />
  • These reductions in repo rate reverse repo rate and crr will help money come into market easily. Which will increase demand which is our main target in providing all these bail out packages to check recession and check slowdown. <br />
  • Now banks have to give mor credit to more people. Again to male available the money to consumers so that they demand for things especially houses automobiles garments etc, <br />
  • 1.This will mean drawing down the dollar reserves which is important at this hour. <br /> 2.A debt relief package for the States along with interest rate subsidy on their borrowings, relaxation of fiscal responsibility norms and greater transfer of resources from the Centre to the States are required. <br /> 3. This wil ensure much less lay offs. And impact of slowdown on employement will be felt to very less extent. People will not loose jobs and they are ready to work on less salaries to than having no job. <br />
  • 1.Like till now our main exports were software solutions gems stones and that too to america so what we should learn is art of diversificationj to make ourselves immune of this and such situations in future. <br /> 2.Spend wisely here means not to spend what you don’t have. And saving of morew money always reflect sound economics. <br />
  • The Insurance Laws (Amendments) Bill and The Life Insurance Corporation (Amendment) Bill – were introduced in the Rajya Sabha and the Lok Sabha respectively on 22nd December 2008. The first legislation seeks to raise the FDI cap in the insurance sector from 26% to 49% and allow the same foreign players, who have played havoc with the global financial system, to expand their control in the Indian insurance sector and gain access to the savings of our people. <br />
  • An assessment by world bank says India could even triple the size of economy it has today in next 15 to 20 years. A few more slumdogs can become millionaire by then. <br />

Recession Presentation Transcript

  • 1. Shikha Sota
  • 2. Stock market crash Mass retrenchment Depression World Economy • The BRIC countries had been posting 7%10% grow rates for years. • Property and stock market booms Emergency loans Sub prime Inflation Economic disaster Profits down Falling Interest rates • Powered by growth in China (11%), India (9%) and Russia (8%). Bail out Pink slips • The world economy grew 5.2% in 2007 Downturn Recession Millions homeless
  • 3. Depression Population (in Millions) 2007 191.6 Brazil 141.6 Russia 1,123.3 India 1,320.0 China 567.4* ASEAN *2006 available data GDP Value (in current prices,US$B) Foreign Exchange Reserves (US$B) 2007 1,314.2 1,291.0 1,171.0 3,280.1 1073.9* 2007 180.1 445.2 249.6 1531.3 368.8* Real GDP Growth 2008F 5.2 7.0 7.9 9.7 5.4 2009F 3.5 5.5 6.9 9.3 5.4 Inflation 2008F 5.7 14.0 7.9 6.4 9.4 2009F 5.1 12.0 6.7 4.3 6.9 Emergency loans Sub prime Inflation Economic disaster Profits down Sources: IMF World Economic Outlook (Oct 2008); World Bank Key Development Data & Statistics ADB Asian Development Outlook 2008 Update (September 2008); www.aseansec.org Bail out Pink slips Mass retrenchment BRIC: Emerging nations of growth BRICA Falling Interest rates Stock market crash Downturn Recession Millions homeless
  • 4. Stock market crash Mass retrenchment Depression Profits down Falling Interest rates Bail out Pink slips What difference a year makes? Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 5. Rec Stock market crash Mass retrenchment Depression ion ess • Visible in real income, employment, industrial production, and wholesale-retail sales. Emergency loans Sub prime Inflation Economic disaster Profits down Falling Interest rates • When real GDP growth is negative for two or more consecutive quarters. Bail out Pink slips • Contraction phase of business cycle Downturn Recession Millions homeless
  • 6. Stock market crash Mass retrenchment Depression s es Ca u Downturn Recession Millions homeless • Insufficient transparency • Inadequate regulation • Creation of complex instruments. Emergency loans Sub prime Inflation Economic disaster Profits down Falling Interest rates Bail out Pink slips • Sub prime crises
  • 7. Mass retrenchment Depression me pr i ub S • Financial term used to identify borrowers who don’t qualify for a ‘prime’ loan. • Pays higher interest rate and higher fees for a loan. Emergency loans Sub prime Inflation Economic disaster Profits down Falling Interest rates • Subprime borrower: whose credit score is below 620 Bail out Pink slips Stock market crash Downturn Recession Millions homeless
  • 8. Pink slips Mass retrenchment Depression nd ro u g • US government wanted to give everyone the opportunity to own his or her own home, even those who weren’t creditworthy. Emergency loans Sub prime Inflation Economic disaster Profits down • Mandated that banks make loans to subprime borrowers through the Community Reinvestment Act (CRA). Bail out Falling Interest rates ack B Stock market crash Downturn Recession Millions homeless
  • 9. Mass retrenchment Depression nd ro u g • Financial institution needed to get those loans off their books by selling them to someone else. • Fannie Mae and Freddie Mac sold them as bonds Profits down Falling Interest rates • Sold them to Fannie Mae and Freddie Mac Bail out Pink slips ack B Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 10. Mass retrenchment Depression nd ro u g • Securitized mortgages ended up in banks and financial institutions around the world. Profits down Falling Interest rates • No one really knew how much subprime exposure they had. Bail out Pink slips ack B Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 11. Stock market crash Mass retrenchment Depression Profits down Falling Interest rates Bail out Pink slips US economy : No end to financial turmoil Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 12. Stock market crash Mass retrenchment Depression Low confidence level Profits down Falling Interest rates Bail out Pink slips Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 13. Mass retrenchment Depression Consumer bail out • Consumer spending - major driver of the US economy • Consumer confidence reached all time low Emergency loans Sub prime Inflation Economic disaster Profits down Falling Interest rates • Consumers had cut borrowing & spending Bail out Pink slips Stock market crash Downturn Recession Millions homeless
  • 14. Mass retrenchment Depression ent ym plo Profits down Falling Interest rates Bail out Pink slips em Un Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 15. Stock market crash Mass retrenchment Bank Of America 35,000 3 General Motors 34,000 4 Hewlett-Packard 25000 5 Lehman Brothers 23000 6 Pink slips 73,000 2 At & T 17000 7 Express Delivery Company DHL 15000 8 Starbucks 12000 9 Chrysler 12000 10 Wells Fargo 11000 11 Dow Chemical 11000 ( Source: Business world) Emergency loans Sub prime Inflation Economic disaster Profits down Falling Interest rates Citigroup Bail out 1 Depression Downturn Recession Millions homeless
  • 16. Mass retrenchment Depression ces pr i Profits down Falling Interest rates Bail out Pink slips Oil ing Ris Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 17. Stock market crash Mass retrenchment Depression Profits down Falling Interest rates Bail out Pink slips Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 18. Stock market crash Mass retrenchment Depression llar do ing clin De Profits down Falling Interest rates Bail out Pink slips Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 19. Stock market crash Mass retrenchment Depression k et ar ck m ed Sto ash cr Profits down Falling Interest rates Bail out Pink slips Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 20. Mass retrenchment Depression ion ess • Fear of recession looms over the world Profits down Falling Interest rates • Whenever the US sneezes, the world catches a cold. Bail out Pink slips Rec Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 21. Stock market crash Mass retrenchment Depression Growth rate of major economies Downturn Recession Millions homeless 3.0 2.0 2009F 2008F 2007 2006 Euro Area Japan F – forecasts Source: World Economic Outlook, IMF, Oct 2008 Emergency loans Sub prime Inflation Economic disaster Profits down US 2005 2004 2003 2002 1.0 0.0 Falling Interest rates Bail out Pink slips 4.0
  • 22. Millions homeless Stock market crash Mass retrenchment Depression Recession Profits down Falling Interest rates Bail out Pink slips 11 July, 08 The largest mortgage lender in the US - was seized by federal regulators. Downturn Global Economy Emergency loans Sub prime Inflation Economic disaster
  • 23. Millions homeless Depression Recession Global Economy 14 Sep. 08 •Investment Bank Lehman brothers files for Bankruptcy protection on 15 September 2008 •Merrill Lynch & co. inc. to be taken over by Bank of America. Emergency loans Profits down 14 Sep. 08 Bail out Pink slips Mass retrenchment Downturn Falling Interest rates Stock market crash Sub prime Inflation Economic disaster
  • 24. Millions homeless Stock market crash Mass retrenchment Depression Recession Pink slips 20 Sep. 08 Bail out 18 Sep, 08 Falling Interest rates Downturn Global Economy Profits down Emergency loans Sub prime Inflation Economic disaster
  • 25. Millions homeless Stock market crash Mass retrenchment Depression Recession Downturn Global Economy Bail out Pink slips 21 Sep, 08 Profits down Falling Interest rates 22 Sep. 08 Emergency loans Sub prime Inflation Economic disaster
  • 26. Millions homeless Stock market crash Mass retrenchment Depression Recession Downturn Global Economy 29 Sep. 08 Profits down Falling Interest rates Bail out Pink slips 25 Sep, 08 Emergency loans Sub prime Inflation Economic disaster
  • 27. Millions homeless Stock market crash Mass retrenchment Depression Recession Downturn Global Economy Bail out Pink slips 1 Oct. 08 Profits down Falling Interest rates 8 Oct. 08 Emergency loans Sub prime Inflation Economic disaster
  • 28. Millions homeless Depression Recession Global Economy Bail out Pink slips Mass retrenchment Downturn 10 Oct, 08 Profits down Falling Interest rates Stock market crash 13 Oct. 08 Emergency loans Sub prime Inflation Economic disaster
  • 29. Stock market crash Mass retrenchment Depression Profits down Falling Interest rates Bail out Pink slips Steps take by US Government Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 30. Mass retrenchment Depression • March 11, 2008: The Federal Reserve announces a rescue package to provide up to $200 Billion in loans to banks and investment houses. Emergency loans Sub prime Inflation Economic disaster Profits down • March 16, 2008: the Fed provides a $29 Billion loan to JP Morgan Chase & Co. as part of its purchase of investment bank Bear Stearns. Bail out Falling Interest rates US bail out plan Downturn Recession Stock market crash Pink slips Millions homeless
  • 31. Pink slips Mass retrenchment Depression US bail out plan • July 30, 2008: President Bush signs a housing bill including $300 Billion in new loan authority for the government to back cheaper mortgages for troubled home-owners. Emergency loans Sub prime Inflation Economic disaster Profits down • Sept. 07, 2008: The Treasury takes over mortgage giants Fannie Mae and Freddie Mac, pledging up to $200 Billion to back their assets. Bail out Falling Interest rates Stock market crash Downturn Recession Millions homeless
  • 32. Pink slips Mass retrenchment Depression US bail out plan • Sept. 16, 2008: The Fed injects $85 Billion into the falling American International Group, one of the world’s largest Insurance companies. • Sept. 16, 2008: The Fed pumps up $70 Billion more into the nation’s financial system to help ease credit stresses. Emergency loans Sub prime Inflation Economic disaster Profits down • Oct. 03, 2008: President Bush signs$700 Billion Economic Bail-out package. Bail out Falling Interest rates Stock market crash Downturn Recession Millions homeless
  • 33. Pink slips Mass retrenchment Depression US bail out plan • Oct.07, 2008: The Fed says it will start buying unsecured short-term debt from companies, and says up to $1.3 trillion of the debt may qualify for the program. Bail out • Oct.08,2008: The Fed agrees to lend AIG $37.8 billion more bringing total to about $123 billion. Profits down Falling Interest rates Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 34. Pink slips Mass retrenchment Depression US bail out plan • Oct. 14, 2008: The FDIC says it will provide up to a total of $1.4 trillion in loans between banks. • Nov.10, 2008: The Treasury and The Fed replace the two loans provided to AIG with a $150 billion aid package that includes an infusion of $40 billion from the government’s bailout fund. Bail out Profits down Falling Interest rates Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 35. Pink slips Mass retrenchment Depression US bail out plan • Nov.23, 2008: The Treasury says it will invest $20 billion in Citigroup Inc., on top of $25 billion provided on Oct. 14. • Dec.19, 2008: President Bush signs $17.4 billion auto industry bail-out package for General motor and Chrysler LLC. Emergency loans Sub prime Inflation Economic disaster Profits down • Jan. 05, 2009: Auto industry bail-out rejected by US Senate. Bail out Falling Interest rates Stock market crash Downturn Recession Millions homeless
  • 36. Pink slips Mass retrenchment Depression US bail out plan • Jan.16, 2009: The Bank of America will receive $20 billion in fresh US government aid and $118 billion worth of guarantees against bad assets. The emergency funding will help the troubled bank to absorb the losses it incurred when it bought Merrill Lynch. Emergency loans Sub prime Inflation Economic disaster Profits down • March 01, 2009: The U.S Government commits another $30 billion to AIG as the embattled insurer prepares to report the biggest loss in history and struggles to sell asset Bail out Falling Interest rates Stock market crash Downturn Recession Millions homeless
  • 37. Stock market crash Mass retrenchment Depression ina Ch Downturn Recession Millions homeless • Growth likely to slow down • Indonesia, Malaysia, Taiwan, and South Korea to have same impact Emergency loans Sub prime Inflation Economic disaster Profits down Falling Interest rates Bail out Pink slips • Fewer exports to US
  • 38. Pink slips Mass retrenchment Depression ica er m • Fewer exports to America • Prices of commodity fell by 20 to 30 percent Bail out Profits down Falling Interest rates in A at L Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 39. Mass retrenchment Depression Mexico & Canada • Exports to the United States represent about a quarter of each country’s GDP Bail out Pink slips Stock market crash Downturn Recession Millions homeless Profits down Falling Interest rates • Have to bear brunt of slowdown Emergency loans Sub prime Inflation Economic disaster
  • 40. Pink slips Mass retrenchment Depression ope Eur • Fewer exports to US Bail out • Lower sales & profits • Bankruptcies Emergency loans Sub prime Profits down Falling Interest rates Stock market crash Downturn Recession Millions homeless Inflation Economic disaster
  • 41. Mass retrenchment Depression pan Ja • Growth mostly driven by external demand Bail out Pink slips Stock market crash Downturn Recession Millions homeless Profits down Falling Interest rates • Domestic consumption weak Emergency loans Sub prime Inflation Economic disaster
  • 42. H Stock market crash Mass retrenchment Depression ng? lo ow Downturn Recession Millions homeless • Recession could last 30 months into the end of 2010. Emergency loans Sub prime Inflation Economic disaster Profits down Falling Interest rates • Output will continue to fall through the end of 2009. Bail out Pink slips • More job losses to continue.
  • 43. Stock market crash Mass retrenchment Depression Profits down Falling Interest rates Effect of recession on India Bail out Pink slips Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 44. Millions homeless Depression Recession Indicators for recession in India Fall in GDP An unhealthy stock market Falling rupee Growing Unemployment Fall in production Declining personal Income Emergency loans Sub prime Inflation Profits down • • • • • • Bail out Pink slips Mass retrenchment Downturn Falling Interest rates Stock market crash Economic disaster
  • 45. Millions homeless Stock market crash Mass retrenchment Depression Falling Interest rates Bail out Pink slips Downturn Recession Declining GDP Source: World economic outlook, Oct 2008 IMF Profits down Emergency loans Sub prime Inflation Economic disaster
  • 46. Stock market crash Mass retrenchment Depression Share market Profits down Falling Interest rates Bail out Pink slips Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 47. Pink slips Mass retrenchment Depression Share market • Crashes below the psychological mark of 10K • Sensex on Oct 17, 2008 – 9,975 Bail out • Sensex Journey 10K – 21K 493 days 21K – 10K 193 days Emergency loans Sub prime Profits down Falling Interest rates Stock market crash Downturn Recession Millions homeless Inflation Economic disaster
  • 48. Pink slips Mass retrenchment Depression Share market • Foreign & domestic investors have pulled out from stock market. • Stock broking houses are laying-off people. Emergency loans Sub prime Inflation Economic disaster Profits down • People have started saving money. Bail out Falling Interest rates Stock market crash Downturn Recession Millions homeless
  • 49. Pink slips Mass retrenchment Depression Bad News for India • Inflation and the psychological impact of the US crisis, leading the companies to hit the panic button. Emergency loans Sub prime Inflation Economic disaster Profits down • IT and financial sectors, real estate owners, auto Industry, i-banking are confronting heavy loss due to the fall down of global economy. Bail out Falling Interest rates Stock market crash Downturn Recession Millions homeless
  • 50. Stock market crash Mass retrenchment Depression Industrial sector Profits down Falling Interest rates Bail out Pink slips Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 51. Pink slips Mass retrenchment Depression Industrial sector •Companies out of cash Bail out •Car, bike & truck sales down •Steel plants also cutting production Profits down Falling Interest rates Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 52. Mass retrenchment Depression CI IC Profits down Falling Interest rates Industries like garment, gems, textiles, chemicals and jewellery had cut production by 10 per cent to 50 per cent. Bail out Pink slips F Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 53. Stock market crash Mass retrenchment Depression Export Industry Profits down Falling Interest rates Bail out Pink slips Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 54. Pink slips Mass retrenchment Depression Export Industry • Indian export industry in Oct 2008 fell by 12% as compared to Oct 2007 Bail out • Exports by value – In 2007 - $14.6 billion – In 2008 - $12.8 billion Profits down Falling Interest rates Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 55. Pink slips Mass retrenchment Depression Export industry • Indian companies have major outsourcing deals from the US. • India's exports to the US have also grown substantially over the years. Emergency loans Sub prime Inflation Economic disaster Profits down • Indian companies with big tickets deals in the US are seeing their profit margins shrinking. Bail out Falling Interest rates Stock market crash Downturn Recession Millions homeless
  • 56. Stock market crash Mass retrenchment Depression Profits down Falling Interest rates Bail out Pink slips Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 57. Pink slips Mass retrenchment Depression Layoffs & Unemployment • Significant drop in new hiring • Companies has laid off their staffs and cut down compensations Emergency loans Sub prime Inflation Economic disaster Profits down • Companies in IT industry have stopped hiring and projected lower manpower need. Bail out Falling Interest rates Stock market crash Downturn Recession Millions homeless
  • 58. Pink slips Mass retrenchment Depression Layoffs & Unemployment • Firms attached to the capital market are laying off people. • Large companies are putting their future expansion plans on hold. Source: Federation of Indian Export Organizations Emergency loans Sub prime Inflation Economic disaster Profits down • Nearly one crore persons could lose their jobs in the correct fiscal ending March. Bail out Falling Interest rates Stock market crash Downturn Recession Millions homeless
  • 59. Mass retrenchment Depression Layoffs & Unemployment Profits down Falling Interest rates Following report shows anecdotal evidence of downsizing in the IT and financial and many other fields. Bail out Pink slips Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 60. Stock market crash Mass retrenchment Depression Liquidity Crunch Profits down Falling Interest rates Bail out Pink slips Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 61. Pink slips Mass retrenchment Depression Liquidity Crunch • Companies are reluctant in starting new ventures and starting new projects etc. • Projects are halfway to completion as companies are stuck with cash flow issues Emergency loans Sub prime Inflation Economic disaster Profits down • In real estate -building projects are and developers find it difficult to raise finances. Bail out Falling Interest rates Stock market crash Downturn Recession Millions homeless
  • 62. Pink slips Mass retrenchment Depression Export Industry • Indian export industry in Oct 2008 fell by 12% as compared to Oct 2007 Bail out • Exports by value – In 2007 - $14.6 billion – In 2008 - $12.8 billion Profits down Falling Interest rates Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 63. Stock market crash Mass retrenchment Depression Profits down Falling Interest rates Bail out Pink slips Information Technology Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 64. Mass retrenchment Depression Information Technology • Confronting heavy losses due to the fall down of global economy. • Western companies are decreasing their IT budget and investment. Emergency loans Sub prime Inflation Economic disaster Profits down Falling Interest rates • Dependent on large western companies. Bail out Pink slips Stock market crash Downturn Recession Millions homeless
  • 65. Mass retrenchment Depression Information Technology • Tech companies in US & elsewhere are laying off in thousands • Infosys last year was the worst-performing stock on the benchmark Sensex stock index. Emergency loans Sub prime Inflation Economic disaster Profits down Falling Interest rates • Indian engineers are facing wage cuts and layoffs. Bail out Pink slips Stock market crash Downturn Recession Millions homeless
  • 66. Stock market crash Mass retrenchment Depression Banking sector Profits down Falling Interest rates Bail out Pink slips Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 67. Stock market crash Mass retrenchment Depression Banking sector Downturn Recession Millions homeless • Strong fundamental base following closed banking culture. Emergency loans Sub prime Inflation Economic disaster Profits down Falling Interest rates • ICICI Bank, a bank that had invested in Lehman’s bonds has also suffered Bail out Pink slips • Tough time – liquidity crunch
  • 68. Recession Millions homeless Stock market crash Mass retrenchment Depression Profits down Falling Interest rates Bail out Pink slips Downturn Corrective steps Emergency loans Sub prime Inflation Economic disaster
  • 69. Recession Millions homeless Stock market crash Mass retrenchment Depression Profits down Falling Interest rates Bail out Pink slips Downturn Corrective steps Emergency loans Sub prime Inflation Economic disaster
  • 70. Millions homeless Depression Recession Fiscal policy Money Money available for available for spending spending More More spending by spending by govt. to govt. to create jobs create jobs Individuals Individuals get salary get salary and spend and spend money money Automatic Automatic Fiscal Fiscal policy policy Income to Income to unemployed unemployed Emergency loans Sub prime Inflation Demand Demand picks picks up; up; Market Market can can recover recover Profits down Tax cuts for Tax cuts for business/In business/In dividuals dividuals Bail out Pink slips Mass retrenchment Downturn Falling Interest rates Stock market crash Economic disaster
  • 71. Millions homeless Stock market crash Mass retrenchment Depression Downturn Recession Monetary policy Pink slips Profits down Falling Interest rates Bail out More money available for banks to give loans Emergency loans Sub prime Inflation Economic disaster
  • 72. Stock market crash Mass retrenchment Depression Profits down Falling Interest rates Bail out Pink slips Measures taken by government and RBI Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 73. Mass retrenchment Depression 1st stimulus package • Additional planned expenditure of Rs.20,000 crores for the current year. • Refinance facility of Rs. 4000 crore for the National Housing Bank. Emergency loans Sub prime Inflation Economic disaster Profits down Falling Interest rates • 4% cut in CENVAT Bail out Pink slips Stock market crash Downturn Recession Millions homeless
  • 74. Mass retrenchment Depression 1st stimulus package • Refinance facility of Rs. 7000crores for SIDBI to support incremental lending to MSME’s. Bail out Pink slips Stock market crash Downturn Recession Millions homeless • Elimination of export duty on IRON ORE FINES Emergency loans Sub prime Inflation Economic disaster Profits down Falling Interest rates • Elimination of import duty on NAPTHA
  • 75. Mass retrenchment Depression 1st stimulus package 1st stimulus package • Additional funds of Rs.1100crores to ensure full refund of Terminal Excise Duty/CST. Profits down Falling Interest rates • Additional allocation of Rs.350crores for export incentive schemes. Bail out Pink slips Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 76. Pink slips Mass retrenchment Depression 1st stimulus package 1st stimulus package • Exporters will be allowed refund of service tax on foreign agent commissions up to 10%. Bail out • IIFCL has been authorized to raise Rs. 10,000crore through tax free bonds. Profits down Falling Interest rates Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 77. Stock market crash Mass retrenchment Depression 2nd stimulus package 2nd stimulus package • Reverse Repo rate also reduced from 5 to 4% Bail out Pink slips • Repo rate reduced from 6.5% to 5.5% Downturn Recession Millions homeless • Further liberalization of policy on ECB’s Emergency loans Sub prime Inflation Economic disaster Profits down Falling Interest rates • CRR reduced from 5.5% to 5%
  • 78. Pink slips Mass retrenchment Depression 2nd stimulus package 2nd stimulus package • Credit targets of public sector banks are being revised. Emergency loans Sub prime Inflation Economic disaster Profits down • EXIM Bank has obtained a Rs.5000 crore line of credit from RBI and will provide pre and post-shipment credit to Indian exporters at competitive rates. Bail out Falling Interest rates Stock market crash Downturn Recession Millions homeless
  • 79. Pink slips Mass retrenchment Depression 2nd stimulus package 2nd stimulus package • Several other measures to support exports, housing, micro, small and medium enterprises (MSME’S) and the textile sectors. Bail out • FII investment in corporate bonds would be increased from $6 Billion to $15 Billion Profits down Falling Interest rates Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 80. Pink slips Mass retrenchment Depression 3rd stimulus package 3rd stimulus package • Service tax rate reduced by 2% Bail out • Central excise rate reduced by 2% • 4% excise duty cut to be valid beyond 31st march 2009 Emergency loans Sub prime Inflation Economic disaster Profits down Falling Interest rates Stock market crash Downturn Recession Millions homeless
  • 81. Mass retrenchment Depression 3rd stimulus package 3rd stimulus package • Custom duty exemption on Naphtha to be valid beyond 31st march 2009 Bail out Pink slips Stock market crash Downturn Recession Millions homeless Profits down Falling Interest rates • Excise duty on bulk cement slashed by 2% Emergency loans Sub prime Inflation Economic disaster
  • 82. Pink slips Mass retrenchment Depression 4th stimulus package 4th stimulus package • Special package of Rs.325 crores for Leather and Textile sectors. • Procedure for claiming duty drawback refund and refund of terminal excise duty further simplified. Bail out Profits down Falling Interest rates Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 83. Pink slips Mass retrenchment Depression Other measures Other measures • Public sector banks to give working capital demand loans up to 20% of the existing fund based limits. Bail out • Borrowing rate for micro industries stands reduced by 100 basis points. Profits down Falling Interest rates Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 84. Mass retrenchment Depression Corrective Measures • RBI needs to neutralise the outflow of FII money by unwinding the market stabilisation securities . Bail out Pink slips Stock market crash • In the IT sector, there should be correction in salary offerings rather than job cutting. Sub prime Inflation Economic disaster Profits down Falling Interest rates • State governments must be aided. Emergency loans Downturn Recession Millions homeless
  • 85. Pink slips Mass retrenchment Depression Corrective Measures • Indian Companies have to adopt a multi-pronged strategy like diversification of the export markets. Emergency loans Sub prime Inflation Economic disaster Profits down • Public should spend wisely and save more. Bail out Falling Interest rates Stock market crash Downturn Recession Millions homeless
  • 86. Pink slips Mass retrenchment Depression Corrective Measures • Checking the limit of foreign players. • In real estate the builders should drop prices, so as to bring buyers back into the market. Bail out Profits down Falling Interest rates Stock market crash Downturn Recession Millions homeless Emergency loans Sub prime Inflation Economic disaster
  • 87. Mass retrenchment Depression WOW!! • Indian economy – not in recession stage Bail out Pink slips Stock market crash • GDP growth rate down, but still expected to be 6% in India. Sub prime Inflation Economic disaster Profits down Falling Interest rates • Slow down stage Emergency loans Downturn Recession Millions homeless