global recession n its impact on indian economy

1. & ITS IMPACT ON INDIAN
ECONOMY
Global Recession

2. 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“.
 A Recession is a contraction phase
of the business cycle.

4. o The National Bureau of Economic Research
(NBER) defines an economic recession as:

7. What Is Global Recession ?
 Recession that affects many countries around the
world
 That is, a period of global economic slowdown or
declining economic output.
 International Monetary Fund defines a global
recession:

8.  Since World War II there were only four global recessions:
- July 1980 - November 1982
(2 years total)
- July 1990-March 1991
(8 months)
- March 2001-November 2001
(8 months)
- December 2007-March 2009
(15 months)

10. “Even If America Sneezes,
the world
Gets a Flu or Pneumonia.”
INTRODUCTION

11.  This became true when Indian markets crashed
because of recession in the US and allover the
globe
 Recession loomed over the United States
 Weakening of the American economy was bad
news, not just for India, but also rest of the world
too.

13. Causes of crisis in United States
 Sub prime mortgage crisis (home loan defaults)
 Rising oil prices at $100 a barrel
 Global Inflation
 High unemployment rates
 A declining dollar value
 All this slowed down the growth of the economy and as the
GDP growth rate fell to 2%, recession set in.

14. Impact of Recession in India
 Indian companies have major outsourcing deals from
the US.
 India's exports to the US have also grown substantially
over the years.
 For the first time in five years, India’s export growth
has turned negative. Exports for October 2008
contracted by 15% on a year-on-year basis as over 40%
of India’s export market had been slowing for months.
 This became on those reasons due to recession
stroked India

15. • S H AR E M AR K E T
• I N F O R M AT I O N T E C H N O L O G Y I N D U S T RY
• R E AL E S TAT E S E C TO R
• I N D U S T R I AL S E C TO R
• B AN K I N G S E C TO R
• AG R I C U LT U R E S E C TO R
• E X P O R T
• I M P O R T
• F O R E I G N D I R E C T I N V E S T M E N T
Effect of Recession on Different
Sectors of the Country

16. Share Market
 Most people have sold the shares.
 Foreign investors have pulled out from stock market.
 The Indian stock markets also crashed due to the
slowdown in the U.S economy.
 The Sensex crashed by nearly 13% in just two trading
sessions in January
 People chose saving money rather than investing them
in stock market.

17. Information Technology Sector
 Recruitment by IT companies at IIT Kanpur has
gone down from 130 students in 2007 to 72 in
2008.
 IT companies are predicted a drop of 15% in
growth from 30% in BPO sector.
 India's outsourcing industry slowed down.

19. Effect of Recession on Steve Infotech
Solutions
 In March 2005, Sampath Nathan, a Bangalore-based first-
time entrepreneur, started a small back office processing
firm, Steve Infotech Solutions, with a corpus of Rs 1.5
crore, to make the most of the IT/BPO boom.
 A large chunk of the funds came from his savings, but he
also borrowed Rs 60 lakh from a bank.
 The initial response was good.
 It offering back office support services to US marketing
firms for online lead generation & providing voice-based
processing services to a few telecom network providers in
the UK.

20.  In November 2008, in the wake of the global
financial meltdown, Nathan closed down the
company’s Nandidurga Road office, where he had
employed over 80 persons.
 He now runs a mobile catering business and is
paying off the bank loan from whatever profit he
makes.

21. Real Estate Sector
 One of the casualties during this time was real estate,
building projects were half done all over the country and
in this tight liquidity situation developers find it difficult to
raise finance.
 The demand for houses had reduced significantly and
property prices across India has registered 15-20% fall.
 Lehman Brothers had signed a partnership with some of
the real estate companies like Peninsula Land Ltd and
DLF Assets because of heavy loses

22. Effect of Recession on Parsvnath Developers
 Company’s net profit decline to Rs.138.53 crore as
compared to Rs.586.48 in 2007-08.
 In 2008-09 company’s share is Rs.151.35 highest
and drops to Rs.30.55.
 Market capital of the company in the fiscal year is
Rs.2725.25 crore

23. Industrial Sector
 Government and other private companies are reluctant in
starting new ventures and starting new projects.
 Projects were halfway to complete, or companies got stuck
with cash flow were unable to reach break even, and were
running out of cash.
 Companies in the private sector and government sector
hesitated to take up new projects and continued working on
existing project.
 As very less new production were taking place, this leaded
to loss of export deals and created unemployment.

24. Banking Sector
 As companies were in loss many banks suffered crises
in recovering loans which in turn had an adverse effect
on economy and also created liquidity crunch.
 Falling down of Lehman had a great impact on the
leading international bank, ICICI Bank, a bank that had
invested in Lehman’s bonds. This meltdown even had
covered the Axis Bank but not to a great extent
 Central banks have worked to improve liquidity but
were charging higher credits. The interest rates have
drastically increased from 11.5% to nearly about 16%.

25. Effect of Recession on ICICI
 ICICI Bank's overseas operations has reported
market to market losses of $264.34
million (Rs1,060 crore) on account of its exposure
to credit derivatives and investments as on January
31, 2008.
 This could wipe off up to 9% of this year’s profit for
ICICI.
 ICICI and its subsidiaries abroad have an aggregate
exposure of $2.2 billion in credit derivatives.

26. Agriculture Sector
 There had been sharp decline in the exports of
agricultural products specifically to countries
including the US and Europe during April 2008-
February 2009, the value of export declined
from $1,682 million to $735 million to the
United States.
 There is a ban virtually on all food grains
exports, rice and wheat are banned.

27. Export
 Due to decreasing $ rate against Indian rupees
exporters were earning less
 The exporters increase their prices so as to receive the
same income in rupees as they did before, the demand
of their commodities felt and lead to greater losses.
 As such in the case of a depreciating dollar, exporters
had to bear the loss as a cut in margins which in some
cases leaded to loss.
 This lead to an adverse effect on India’s economy and
lead to a long term loss to India’s growth

28. Import
 India imports generally Petroleum products,
capital goods, fertilizers, chemicals, pulp and
uncut stones.
 The importers in the case of a stronger rupee now
had to pay more for the same commodity as the
exporter increased the price for the same.
 Thus it also lead to hike in price and fall in demand
having effect on economy.

29. Foreign Direct Investment
 Foreign Direct Investment, is the investment by
foreign nationals in a country’s industries.
 In case of weakening of US$, there will be
lesser funds in terms of rupees, invested by
the US citizens and thus the FDI from US as
such will be effected adversely.

30. Corrective Steps Taken to Check Recession
 RBI needed to neutralize the outflow of FII money by unwinding the
market
 In the IT sector, there should be correction in salary offerings rather
than job cutting.
 Public should spend wisely and save more.
 Taxes including excise duty and custom duty should be reduced to
lighten the adverse effect of economic crunch on various industries.
 In real estate the builders should drop prices, so as to bring buyers
back into the market.

31. Current Economic Scenario-Impact of
Recession on India
 Recession has grabbed almost all the organizations of the world.
 Several people have lost jobs - facing the financial problems.
 Government - doing best to come out of the problem.
 Banks are providing business loans at low rate.
 Government - providing money packages to organizations.
 If I talk about India, here the situation is still satisfactory if compare it
with other countries of the world.

32.  Reserve bank of India (RBI) has decreased the rate of interest.
 SBI and ICICI are also providing different types of loans at a low
rate of interest.
 Organizations are cutting cost to stand in the market.
 Export businesses of India is going up.
 The real state was doing good business.
 But now a days the condition of real state is still worse because
of recession.