An economy which grows over a period of time tends to slow down thegrowth as a part of the normal economic cycle. An economy typicallyexpands for 6-10 years and tends to go into a recession for about sixmonths to 2 years. A recession normally takes place when consumers loseconfidence in the growth of the economy and spend less. This leads to adecreased demand for goods and services, which in turn leads to adecrease in production, lay-offs and a sharp rise in unemployment.Investors spend less as they fear stocks values will fall and thus stockmarkets fall on negative sentiment.
The term business cycle (or economic cycle) refers to economy-wide fluctuations in production or economic activity over several months or years. These fluctuations occur around a long-term growth trend, and typically involve shifts over time between periods of relatively rapid economic growth (an expansion or boom), and periods of relative stagnation or decline (a contraction or recession).Business cycles are usually measured by considering the growth rate of realgross domestic product. Despite being termed cycles, these fluctuations in economic activity do not follow a mechanical or predictable periodic pattern.
Recession means a slowdown or slump or temporary collapse of a business activity. In its earlystage it can be controlled in a methodical manner. Experience helps toavert total collapse. Unchecked, it leads to severe depression. Depressionis a dead end. It is time to close shop completely. It is a total state ofirrevocable economic failure.
In the present age of globalization, India cannot remain isolated from the clutchesof recession. Though Indian economy is fundamentally strong with a record growth rateof 10.3% in 2007 and 7.3 in 2008, but the anticipated growth rate for 2009 is around 6to 6.5%. Indian industry, service sector and agriculture are under pressure today. Textileautomobile and diamond industries are showing negative growth. Because of low demandfor goods and services, prices have come down lowering inflation rate from 12.5 %to2% today. Unemployment problem is becoming serious day by day due to reducingpurchasing power of the consumers.
Indian companies have major outsourcing deals from the US. India's exports to the US have also grown substantially over the years. The India economy is likely to lose between 1 to 2 percentage points in GDP growth in the next fiscal year. Indian companies with big tickets deals in the US would see their profit margins shrinking.As of now, IT and IT-enabled services, textiles, jewellery, handicrafts and leather segments will suffer losses because of their trade link. Certain sections of commodities could face sharp impact due to the volatile nature of these sectors.
Indian textile industry has gone through the metamorphosis from being a 'cottage industry' to the state of supremacy. The industry is the second largest employer in India, next to agriculture. It generates employment opportunities for approximately 33.17 million workers directly, and 54.85 million workers indirectly, making a massive total of 88.02 million. Until the clutch of recession took over, it was a doorsill of growth. Indian textile industry was one of the world's best performing industries, during the past few years, but now there is a downtrend in the industry graph. Industry analysts predict that by the end of April 2009, approximately half a million direct workers from textile, garment and handicraft sectors will lose their jobs. Considering the other people who are indirectly associated with the textile industries, total direct and indirect job losses are expected to reach 6 million.
Approximately, 60% of the total garments manufactured in India are exported to foreign markets like EU, US, and Japan, generating revenue of upto US$ 52 billion. Textile export houses are one of the biggest employers in the country. Economic slowdown in the US and EU has affected the textile business in India, resulting in a drastic decline in the country's garment exports. As meltdown diminishes the garment sales in US, Indian suppliers are beginning to feel the pinch. Food is the first preference over clothing. As the customers of the Western countries, curtail their expenses to fight slowdown, export market of apparels in countries like India began shrinking. To sustain themselves in the market, apparel manufacturers chose to go in for cost cutting; thereby opting for lay-offs. An estimate states that during 2008, almost 8, 00,000 garment and textile employees had lost their jobs.
During October 2008, as economic slowdown branched out, the total output of the textile sector came down by 10%. Simultaneously, investments in textiles were also decreasing, ultimately affecting the profitability of the industry. Some biggest apparel companies in India, which are mainly located in Ludhiana in Punjab generating employment for 4,00,000 jobs has suffered a 50% loss in sales; especially the exports during 2008. This has affected 20 to 30% of jobs. Gujarat and Tamil Nadu, the two largest textile manufacturing states of India have been knocked by the sag in garment exports. This has ultimately resulted in retrenchments and layoffs. Majority of the layoffs target the daily-wagers, who comprise 25-30% of a company's workforce. Textile industries are running on 75% of their capacities, or have reduced their three shifts into one.
Speaking about the future of the textile market, the TAI President, opines, “Our textile exports will begin recovering in few months. Although, export target for 2010 are very high, and we may not achieve it, in my opinion, leaving behind all the speculation, we should put in best of our efforts.
The economic development of any country to the large extend depend uponhealthy and wealthy banking system. They are the driving engine for the development.They play an important role in economy like the role of blood vessels. Actually banks arelike backbone for industries. They provide loans and capital to the business, industry,agriculture etc. Loss of profit and Capital of these banks bring serious threat to theeconomic development of that country. It effects on capital market and money marketwhich provide long term and short term lending economy.
The present world recession has its roots in sub- prime crises. Greedy,uncontrolled and mighty banks and financial institutions provided loans to those borrowerswho were not eligible for the same.The construction industry saw its highest booming.But trouble started when the second class of borrowers failed to refund their loans. Thewhole banking industry came in to danger. The global banks and brokerages have had towrite off estimated $ 512 billion in sub-prime losses. City group suffered a loss of $55billion and Merril Lynch about $52.2 billion.
Indian banks and financial institutions exhibited resilience in the midst of a severeglobal financial crisis. Now withstanding the growing financial integration and globalization,the banking system in India had no direct exposure to the subprime assets that triggeredthe crisis in the advanced economies. The direct exposure of banks in this regard wasalso insignificant. Much before the crisis started in the advanced economies, the ReserveBank had taken a number of measures which contributed to strengthening the resiliencein the Indian banking system.Some banks, however, had indirect exposure through their overseas branches andsubsidiaries to the US sub-prime markets in the form of structured products, such ascollateralized debt obligations and other investments.
Banks have suffered losses, including some public sector banks like Punjab National Bank, Bank of India, State Bank of India and Bank of Baroda as they had an exposure to the instruments issued by Lehman and Merrill Lynch. It wasn’t just the private bank ICICI, although the latter posted the maximum losses due to their exposure.However, if we take the overall the Banking sector in India, there is nothing to worry as heavy regulation coupled with the tendency of banks to be cautious (more than regulations stipulated) has protected the Indian banking industry. Even ICICI can easily handle the loss it has suffered. What it might impact is ICICI’s future plans to expand, but deposits are safe
Despite the fact that indian banking system suffered a lot during recession ,it however managed to control.the reasons are:In the period of globalization also Indian banking working is not deviated from its customaryworking. Indian banks are risk avoiders. They take calculated risk. They are verycautious in lending loans. They give a lot of importance to the repayment capacity andstate of affairs of the borrowers. So their recovery rate is high as compared to banksoperating in advanced countries.The nationalization of 20 major commercial banks in the year 1969 and 1980 has proveda boon for Indian banking. They are under close control of central government. Todaymajor parts of the deposits are with these banks. They are prevented from greedy thrustof profit. Their earning capability and sound economic position have not affected in thepresent age of global recession. The principal object of nationalization is to safeguard theinterest of the economy and not their own.In this period of liberalization also, RBI has succeeded to keep the Indian banking systemunder control. Banks in India operate as per the guidelines and direction of RBI. Theyhave to follow statutory obligations like Bank rate, Cash Credit Ration, liquidity Ratioetc. Right from the beginning or recession, RBI has made necessary changes to keepbanking industry on right track. It has reduced bank rate, CRR and SLR to overcomethe problem of liquidity crunch.Indian Finance Ministry has taken effectivesteps to face the issue of global recession. It has been issuing guide lines to RBI andcommercial Banks time to tackle the recession. Because of good combination betweenFinance Ministry and RBI efforts are being made to keep the losses of banking industryto minimum. Fiscal policies of the government have been effective in such critical times.
The journey of civil aviation in India began in December 1912. It coincided with the opening of the first domestic air route between Karachi and Delhi by the Indian state Air services in collaboration with the imperial Airways, UKIn early 1948, a joint sector company, Air India International Ltd., was established by the Government of India and Air India (earlier Tata Airline) with a capital of Rs 2 crore and a fleet of three Lockheed constellation aircraft.As was to be expected, liberalisation of air services led to launching of several private sector airlines. East West, Damania Airways, Air Sahara, NEPC Airways, Jet Airways, ModiLuft were some of the prominent airlines set up during that period.2003 is a watershed year for Indian aviation industry for two significant reasons. First, with re-launch of new private sector airline it finally signalled the end of the shock that followed from the failure of airlines in the earlier phase. Secondly, India entered the era of low cost airlinesIf Indian aviation in 2007 has to be described in a single word then ‘consolidation’ would be the right term to use. After a fiercely fought price war in 2006, that saw several airlines coming dangerously close to bankruptcy and thus raising the spectre of a repeat of the 1990s, 2007 saw saner elements prevail.
As the Indian economy has been booming in the last few years, the India aviation industry was expanding too. There were new budget airlines and private players like Vijay Mallya's King Fisher coming in to play and thus making the public sector Air India and Indian Airlines more competitive in the process. As there were more flights coming in to business, the number of job opportunities in the industry has also gone up. Students started signing up for courses like airline pilot's, flight attendant's, ground crew etc. The job growth rate was good. The salary and perks were great as well. Every one was pretty happy.
Then the US economic recession came. India was hoping that it would not be affected by the global economic recession. But those hopes are not found to be true. Slowly the effects of recession have reached India too. And it affected the aviation industry of India too. As the cash starved managements started looking for cost cutting measures, lay offs started to come in to action. Some people have lost their jobs already. The new recruitments are going at a slow rate. For the time being, the market was not great for the aviation industry in India. After a period of drastic growth, Indian Airlines is now gripped with challenges that are also impacting the industry across the globe, including high Aviation Turbine Fuel (ATF) prices, rising labor costs, shortage of skilled labor, excess capacity, huge debt burden , intense price competition and job losses
Stock markets & recessionThe economy and the stock market are closely related. The stock markets reflect the buoyancy of the economy. In the US, a recession is yet to be declared by the Bureau of Economic Analysis, but investors are a worried lot. The Indian stock markets also crashed due to a slowdown in the US economy.The Sensex crashed by nearly 13 per cent in just two trading sessions in January. The markets bounced back after the US Fed cut interest rates. However, stock prices are now at a low ebb in India with little cheer coming to investors.
The rise and fall of the Sensex has been dizzying. The markets are back to the point it scaled three years ago. . . The BSE Sensex on Friday crashed by 1,071 points to close at 8,701 points. This has been an incredible year for the markets, after scaling the 21,000 peak in January 2008, the markets are at 8,000 now.the Reserve Bank of India [ Get Quote ] gave the markets its biggest blow as it left key interest rates unchanged and lowered the GDP target to 7.5-8% for 2008-09.The worst hit stocks were DLF, Ranbaxy Laboratories [ Get Quote ] Hindalco Industries [ Get Quote ], Tata Motors [ Get Quote ], Reliance Industries [ Get Quote ] and Mahindra & Mahindra.
stock markets plunged following sustained capital outflows, shaky global markets, poor company results, and the International Monetary Fund's warning that economic growth in advanced nations will be close to zero. The BSE Sensex fell by 398.20 points, or 3.92%, to fall to 9,771.70.October 24, 2008: The Sensex plunged by 1070.63 points (10.96 per cent) to close at 8,701.07. The National Stock Exchange's Nifty ended at 2,557.25, down 13.11 per cent or 386 points. The BSE Midcap closed 8.38 per cent lower and BSE Smallcap Index ended 7.66 per cent down.March 17, 2008: The Bombay Stock Exchange [ Images ] benchmark Sensex crashed by 951 points to close at 14,809 on weak cues from the overseas markets. Unabated selling saw the index slip below the 15,000-mark. March 3, 2008: The Bombay Stock Exchange benchmark Sensex witnessed its second-largest fall ever losing 900.84 points to close at 16,677.88 on frantic selling by funds, triggered by deepening concern over United States recession and some Budget-related concerns.January 21, 2008: The Sensex saw its highest ever loss of 1,408 points at the end of the session on Monday. The Sensex recovered to close at 17,605.40 after it tumbled to the day's low of 16,963.96, on high volatility as investors panicked following weak global cues amid fears of the US recession.
January 22, 2008: The Sensex saw its biggest intra-day fall on Tuesday when it hit a low of 15,332, down 2,273 points. However, it recovered losses and closed at a loss of 875 points at 16,730. The Nifty closed at 4,899 at a loss of 310 points. Trading was suspended for one hour at the Bombay Stock Exchange after the benchmark Sensex crashed to a low of 15,576.30 within minutes of opening, crossing the circuit limit of 10 per cent.February 11, 2008: The Sensex finally ended with a loss of 834 points (4.8% ) at 16,631. The NSE Nifty slipped over 5% (263 points) to 4,857.May 18, 2006: The Sensex registered a fall of 826 points (6.76 per cent) to close at 11,391, following heavy selling by FIIs, retail investors and a weakness in global markets. The Nifty crashed by 496.50 points (8.70%) points to close at 5,208.80 points.December 17, 2007: A heavy bout of selling in the late noon deals saw the index plunge to a low of 19,177 - down 856 points from the day's open. The Sensex finally ended with a huge loss of 769 points (3.8%) at 19,261. The NSE Nifty ended at 5,777, down 271 points.10 October 2008: The markets crashed by 801 points to close at a low of 10,528. The crisis in the global markets, a fall in the rupee and poor IIP numbers led to the fall.October 18, 2007: Profit-taking in noon trades saw the index pare gains and slip into negative zone. The intensity of selling increased towards the closing bell, and the index tumbled all the way to a low of 17,771 - down 1,428 points from the day's high. The Sensex finally ended with a hefty loss of 717 points (3.8%) at 17,998. The Nifty lost 208 points to close at 5,351.
Bloodbath in Indian Stock Marketsbiggest fall in the history of Indian stock market. The fall was so unexpected and harsh, investors just could not digest it.huge number of ambulances were pressed into service between brokers’ offices and nearby hospitals to reach persons complaining of chest pain or uneasiness. Doctors in hospitals across the city were hard-pressed to examine the increasing number of patients being brought in with chest complaints and related illnesses. The ICUs of almost all city hospitals were full. ECG machines in several hospitals reported to have failed as the volatile signals were too high to measure. The first lesson is not to let stock price performance become the sole reason for buying, a mistake which was made in abundance in the last 3 months. The present lost all relevance as people chose to focus on the distant future, perhaps simply because the present could never justify those ticker prices; only a hazy dream of the future could. Traders and investors had no time for fundamental analysts, in many cases they were labelled "cribbing fools".The other big lessonone which should have been driven in earlier in May 2006, is the danger of overextending oneself in the futures market. The lure of stock futures is easy to understand. Put in some margin, take a big exposure on a fast moving stock, make a killing when prices shoot up. Repeat exercise. Just that people forgot that prices may also come down and at a pace which none can even imagine, maybe their friendly stockbrokers forgot to tell them that part of the story. The result : unbridled speculation that ran into lakhs of crores, excesses that we are paying for today. Even this fall will not cure investors of their love for futures speculation but if at least some amount of caution is injected it would have been a worthwhile learning. Futures are not toys for amateurs, they are time bombs in the hands of inexpert and inexperienced traders, it’s only a matter of when the fuse runs out.other learning which I hope will play out in the futureas it has in the past, is that it pays to be brave in times of panic such as these. If I was allowed to invest myself , which I am not, I would have no hesitation in deploying serious money into the market today, knowing fully well that prices may fall more tomorrow. And I would be standing there tomorrow to buy more of the same, till my money ran out.
Indian car industry is one of the most promising car industries across the globe. It has gradually strengthened its foothold in the international arena as well. The country is dealing with many car manufacturers, dealers, and associations in various different countries including U.S. From some countries, India imports cars and car components and to some India exports. With this, the global recession is obvious to have its impact on the Indian car industry. Though India has witnessed a growing customer base, it has not inoculated them from the global crisis. The crippling liquidity and high interest rates have slowed down the vehicle demand. However, the falldown started in July with a decline of 1.9% and thereafter the industry saw a major slowdown in October 2008.
Business Analysts reported that Indian car market had recorded a continuous growth of about 17.2% over the last few years but this year the recession has brought the growth to about 7-8%. Be it Tata Motors or Maruti Suzuki the car market has gone down to a tremendously negative terrain. Tata has reported that its profit fell from 34.1 percent to 3.47 billion rupees because of the slower growth in the industrial production. Further, the company has also recorded a 20% decline in the sales as compared to last year. And with its Nano making a big impact before the downturn as such, but after the downturn may hold a bleak future for the world's cheapest car, because the consumer spending has gone very low.Even Maruti Suzuki reported a 7% decline in sales due to rising cost of the materials and a falling rupee value. Even Mahindra & Mahindra, the India's largest SUV and tractor manufacturer, is not immunized, showing profit fall of 20.6%. The famous SUV of Mahindra & Mahindra are Scorpio , Bolero, Sedan which are showing less sales value at that time.
In addition, the uncertain exchange rate and a sudden increase in dollar value against Indian Rupee have contributed to the slowdown. Increasing dollar value has raised the landed cost of imported machine tools and even raw materials required for production by about 14%. In the recent months, banks and car financers have disbursed the approved loan because of the cash crunch. Payments from the OEMs (Original Equipment Manufacturer) have also been delayed and in most cases banks have deferred or disbursed the approved loan. OEMs take this loan from banks and financers for establishments, capacity expansions, or even for the requirement of high-end equipments for car designing and production.Alloy and steel prices have also not shown any reduction in their prices and this high price has actually forced the car manufacturers to hike the car prices. To make the matter worse, it is believed that steel manufacturers across the country are looking for re-imposition of custom duty on steel. Increased cost of raw materials directly affects the cost of the car rolled out, eventually tagging a particular car model with a higher price tag.
The Indian automobile industry is expected to grow to US$ 40 billion by 2015 from the current level of US$ 7 billion in 2008. By the year 2016 the industry is expected to contribute 10% of the nation’s GDP. The industry manufacturers over 11 million vehicles a year, employing more than three million people.The greatest challenge and competition would be from the Chinese automobile industry. The Chinese automobile industry has been able to give stiff completion to India in terms of productivity, cost of manufacturing and technology. Again the present trend of excess manufacturing capability, reduced margins put additional pressure on the industry.The global recession has had a dampener effect on the growth of the industry, but market experts believe it is only a short term phenomenon and are confident of the industry bouncing back.On the positive side, India’s strength in software sector, combined with skilled labor and low cost of manufacturing should place it in a favorable position globally.Recently Ratan Tata, Chairman (Tata Motors) created history by launching the world's cheapest car NANO. The cars pricing is around one lakh, gaining instant recognition in the automobile industry across the globe. It heralded the coming to age of the Indian Automobile Industry.
Retail sector had created a very fast pace of demand in Indian real estate sector which have gain a very high impact image of investing in India. Till October 2008 the real estate sector was a very booming sector in India.The impact of recession in US economy has badly hit Indian real estate market along with sectors like retail, steel, cement, hospitality and logistics Because of lack of uniformity of land laws, slowdown and approval delays, the developers missed to complete their projects within the boom period. The banking sector had not reduced interest rates sufficiently. Banks rates were 10% to 12%.Increase in the price of cement, steel, sand, labor has effected the real estate sector.
The company’s net profit for 2008-09 dipped over 41 percent to Rs.4,629 crore from Rs.6,176 crore earned the previous year.DLF is the market leader in this sector with net profit of 1547 cr.It was way lower than its last year profit by more than 1000 cr. During the year 2008-09 price of share decrease to Rs 21.80 from Rs 338.00.Unitech’s consolidated revenue decrease by 57.1% yoy, from Rs. 11.4 bn in Q3’08 to Rs. 4.9 bn in Q3’09, due to a sharp fall in revenue from the construction and real estate.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 croreTheir profit declined by 81.24% in the last financial year over the last year.This is one of the badly hit company by the economic slowdown.569 is the all time high of this company in 2006 and now trading at just 10% of its all time high.
Effect of Recession on Real Estate The market rates in India were dropped by 10 to 30% in most of prominent as well as upcoming cities.Real estate slowdown affect revenue generation in country.Progress of ongoing project was very slow and the future project has been postpone.Owner want to sell their properties in any cost as a result bargaining power of costumers increased.
The changing economic scenario and the unprecedented restructuring in the global financial services sector israising concerns about the impact of a potential recession on the global outsourcing industry.As corporations across the world put expansion plans and discretionary spending temporally on hold, largetransformational outsourcing contracts may be postponed for at least six to nine months.
India has revenues of 10.9 billion USD from offshore BPO and 30 billion USD from IT and total BPO . India thus has some 5-6% share of the total BPO Industry, but a commanding 63% share of theoffshore component. This 63% is a drop from the 70% offshore share that India enjoyed FY 07, despite theindustry growing 38% in India in FY 07, other locations like Eastern Europe, Philippines, Morocco, Egypt andSouth Africa have emerged to take a share of the market. China is also trying to grow from a very small base inthis industry.BPO sector in India employs more than 700,000 people and accounts for about 35 percent of the BPO marketworldwide.However, while the BPO industry is expected to continue to grow in India, its market share of the offshore pieceis expected to decline.
Current slow down in US will make the Indian IT and BPO companies to reduce their dependency to US andstart marketing their services to other countries like ASIA PACIFIC and Latin America. At this time, it is notclear how long it will take for Indian companies to penetrate into those markets, but the current US market willforce them to act quickly.Tier II IT and BPO companies in India may not withstand the US slowdown so they might consider merging withlarger IT and BPO companies for their survival. This is specifically true for companies those who are doingoutsource work for BFSI companies in US and UK.As the global demand for outsourcing decreases, Indian outsource vendors will reduce hiring new employeesand they may lay-off bottom performers.
In the medium to long-term, 12-36 months and beyond–cost efficiencies and business transformation incompanies will likely gain greater precedence than ever. The more resilient vendors can anticipate futureopportunity areas and build new and differentiated offerings for companies emerging from the turmoil.As newer ways to cut costs are explored, offshoring of higher value adding, knowledge-based work to lowercost locations is likely. Established destinations such as India may benefit due to higher experience andmaturity in these areas.As cash-starved companies focus on survival, they may look to monetise their investments in captiveoperations. The larger third party vendors can gain by acquiring such operations at modest valuations, andsecure the parent company's business through long-term deals.A spate of M&A activity will bring its share of legalities and will provide a fillip to legal outsourcing.Some HR outsourcing deals may be in order, aiming to provide remediation to some of the staff post
According to Everest Research's study, “Global Sourcing in Banking, Capital Markets and Insurance.”vertical-specific BPO opportunites include:(LIST IS GVN)
Existing contractsand outsourcing in conventional areas such as routine F&A or technical support will continue, but growth inthe hard-hit sectors (especially BFSI) will be limited.In sectors, which are not seeing as much slowdown,competition for the few available outsourcing contracts will be strong.The labor-arbitrage-driven offshore model has become a standard expectation for buyers who are now lookingto achieve business and strategic impact beyond cost savings. To achieve this, suppliers will need to continue toinnovate and invest in technology, delivery footprint, and domain and process expertise. Additionally,suppliers will need to identify key focus segments to create successful differentiation in the market.
The current global economic slowdown has made it a roller coaster ride for the world economies.Asia / Pacific is experiencing a deferred impact due to the “domino effect” of the current crisis. With theexpectations of a sluggish GDP growth and consequent reduction in IT spending, countries / markets whichhave a higher dependency on the export markets are expected to be affected more than other countries /markets with stronger domestic demand. A recent study by Forrester reveals that(GIVN IN LIST)Customers have started to reduce project scope and /or postpone new development.
While there are growth-related challenges in the shortto- medium term, there seem to be some opportunities for managing the bottom line for the rest of the year.The macroeconomic environment is depressing andhas impacted the overall confidence in the sector froma market perspective.All in all, the environment looks weakest in a long while,and yet there remain pockets of opportunity. Theseareas, if tapped intelligently, would enable the IT firmsto ease the blow of this financial crisis and help themtide through the tough times.
The recession has affected most business from all over the world including the hotel industry. The lessaffected hotels were those in global markets and those that give out their services to leisure travelers. Leisure travelers continued traveling every year even during the recession.As mentioned above, the least affected hotels were those that cater to leisure travelers. On the otherhand, business travelers changed their perspective on the amount of money to spend and the amount of tripsto make. Some businesses canceled meetings which are usually held in another country and are insteadmade using technology, like video conferencing. Video conferencing is quite cheap considering theexpenses usually incurred when traveling which include flight, accommodation, food etc.
Indian Hotels and Hotel Leela Venture were the worst hit by the foreign exchange losses of 9.4 Cr. And 9.3 Cr. Respectively.India saw Asia's biggest drop incorporate travels pending, falling 25%.When evaluating hotel companies during this down-cycle, Hotels were paying close attention to changes in average daily room rates as an indication of how quickly it may recover once the economy improves.
Post Mumbai terrorist attack combined with the global slowdown have severely impacted the bottom line of the Indian hospitality sector to the extent of 64 per cent during January–Mach 2009.While on the one hand the inflow of foreign tourists came down sharply and the room rates shrinked, there has been a rise in expenses simultaneously. On the other hand, the rapid pace of expansion in hospitality sector of India raised the interest cost borne by Indian hotel industry. The borrowing cost of the hotels went up by 51.65 per cent in fourth quarter of FY ’09, while the total income decreased by 4.47 per cent during the period.Someregistered rise in interest cost, the maximum increase was incurred by TAJ Hotels & Resorts Limited (193.51 per cent) followed by Howard Hotels Limited (164.94 per cent) and Oriental Hotels Limited (89.10 per cent) among others.
The NCR, with an estimated incremental supply of around 7,400 rooms (74% of which are under active construction), across price pointsranging from economy to premium, has the largest supply pipeline in India at present. Of this supply pipeline, around 4,000-5,000 rooms are in the premium segment alone and are expected to be commercialised before 2014.This is as against the NCR’s current supply of around 8,750 premium rooms. While some of this incremental inventory was targeted at the October 2010 Commonwealth Games, the supply of around 13 premium hotels is coming up in the Delhi Aerocity (around the new international airport) during 2012-14.Mumbai, Bengaluru and Pune with over 3,500 additional premium rooms each are not far behind in the supply pipeline. In percentage terms (on existing base), the largest proposed addition is expected in Pune (over 200%) followed by those of Ahmedabad, Hyderabad and Chennai, over the next four years. Bengaluru, Pune and Hyderabad have already witnessed the opening of various new hotels (700-1,000 rooms each) during the past 12-18 months and are still sitting on a large inventory that is in the final stages of construction. Chennai too is expected to double its existing inventory (estimated at 2,150 rooms) in the next three years.
Effect of recession ppt
AFFECT OF RECESSION ON INDIAN BUSINESS BY: Sec ‘Q’ (PGDIB) Rashmi Verma
RECESSION- MEANING• A RECESSION is a decline in a countrys gross domestic product (GDP) growth for two or more consecutive quarters of a year.• A RECESSION is also preceded by several quarters of slowing down.• RECESSION is the result of reduction in the demand of products in the global market. Rashmi Verma
National Bureau of Economic Research (NBER)• 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, employment, industrial production, and wholesale-retail sales” Rashmi Verma
GLOBAL RECESSION• It is rightly said that, “when US sneezes the world catches the cold”• Economists at the International Monetary Fund (IMF) state that a global recession would take a slowdown in global growth to three percent or less.• The IMF estimates that global recessions seem to occur over a cycle lasting between 8 and 10 years. Rashmi Verma
Recession Recession Time Taken Cause & ImpactName YearGreat 1929-1939 10 years Stock markets crashed worldwide,Depression and a banking collapse took place in the United states. This sparked a global downturn, including a second, more minor recession in the United states, the Recession of 1937.1937 Oil 1973-1975 2 years A quadrupling of oil prices byRecession OPEC coupled with high Government spending due to the Vietnam war lead to stagflation in the United States.Early 1980’s 1980-1982 2 Years The Indian Revolution sharplyRecession increased the price of oil around the world in 1979, causing the 1979 energy crisis. Rashmi Verma
Recession Name Recession Year Time Taken Cause & ImpactEarly 1990’s 1990-1991 1 year Industrial production andRecession Manufacturing trade sales decreased in early 1991.Early 2000’s 2001-2003 2 years The collapse of the dot-comRecession bubble, the September 11 attacks and accounting.Early 2008’s 2008-so on continuing The collapse of US economy andRecession other related countriec. Rashmi Verma
Causes of Recession in India• Indian companies have major outsourcing deals from the US Rashmi Verma
Affects of recession on Indian business• The sectors least affected (directly) by the slowdown are Pharmaceuticals, Oil & Gas, FMCG, Media & Entertainment• Those which will feel a moderate impact of the global crises are Power, Automobiles, Retail, Hospitality and Tourism• The sectors most severely affected are Banks, Financial Services, Real Estate, Infrastructure and Information Technology Rashmi Verma
Major sectors affected by Recession• Indian Stock Market• IT and BPO• Banking• Real State• Aviation• Textile• Automobile• Hospitality Rashmi Verma
Textile• cottage industry to the ‘state of supremacy’• second largest employer in India, next to agriculture• generates employment opportunities for approximately 33.17 million workers directly, and 54.85 million workers indirectly Rashmi Verma
• 60% of the total garments manufactured in India are exported to foreign markets like EU, US, and Japan, generating revenue of upto US$ 52 billion• Economic slowdown in the US and EU has affected the textile business in India, resulting in a drastic decline in the countrys garment exports• almost 8, 00,000 garment and textile employees had lost their jobs Rashmi Verma
• October 2008:Othe total output of the textile sector came down by 10%• Punjab generating employment for 4,00,000 jobs has suffered a 50% loss in sales• Majority of the layoffs target the daily-wagers Rashmi Verma
• Dr P R Roy, President, The Textile Association of India (TAI), while discussing the reasons for slump in Industrial production, told Fibre2fashion, “Slowdown in global economy is definitely affecting our textile industry. But, there is a lot of pessimism in the market regarding global recession, which instigates negative thinking among people. So without plotting their own position, the manufacturers have started cost cutting. This can be one of the many reasons for plunging industrial production.” Rashmi Verma
BANKING• banks are like backbone for industries• They provide loans and capital to the business, industry, agriculture etc.• Loss of profit and Capital of these banks bring serious threat to the economic development of that country Rashmi Verma
• The present world recession has its roots in sub- prime crises• The global banks and brokerages have had to write off estimated $ 512 billion in sub-prime losses Rashmi Verma
• the banking system in India had no direct exposure to the subprime assets that triggered the crisis in the advanced economies• the Reserve Bank had taken a number of measures which contributed to strengthening the resilience in the Indian banking system Rashmi Verma
• Banks have suffered losses, including some public sector banks like Punjab National Bank, Bank of India, State Bank of India and Bank of Baroda as they had an exposure to the instruments issued by Lehman and Merrill Lynch. Rashmi Verma
Reason for non failure of Indian banking system during recession• Traditional working of Indian Banks• Strong base of nationalized bank• Effective control of RBI• Role of Finance Ministry Rashmi Verma
Indian Aviation Industry• The First Phase – the Pioneering Years• The Second Phase – Public Sector Era• The third Phase – the Liberalization Era• The Fourth Phase – The Era of Growth and . .• Recession (Fare Setting, Fare War and their Consequences) Rashmi Verma
Aviation before recession• India aviation industry was expanding• There were new budget airlines and private players• The number of job opportunities in the industry was going up• Students started signing up for courses like airline pilots, flight attendants, ground crew etc. Rashmi Verma
Challenges after Recession• High Aviation Turbine Fuel (ATF) prices• Rising labor costs• Shortage of skilled labor• Excess capacity• Huge debt burden• Intense price competition• Job losses Rashmi Verma
Bloodbath in Indian Stock Markets• Investors in Indian markets lost more than 16 trillion Rupees in just 2 days !• The ICUs of almost all city hospitals were fullo The first lessono The other big lessono other learning which I hope will play out in the future Rashmi Verma
Indian Automobile Industries• India is the worlds largest two wheeler manufacturer.• India is the worlds second largest tractor manufacturer.• India has the fourth largest car market in Asia.• India has the worlds largest three wheeler market.• India is fourth largest Automobile exporter in the world. Rashmi Verma
Effect Of Recession• Uncertain exchange rate and a sudden increase in dollar value against Indian Rupee• Delayed Payments from the OEMs (Original Equipment Manufacturer)• Alloy and steel prices have also not shown any reduction in their prices Rashmi Verma
Post Recession• The Indian automobile industry is expected to grow to US$ 40 billion by 2015 from the current level of US$ 7 billion in 2008.• Challenge of Chinese Automobile Industry.• Market Strength of Indian Automobile Industry.• New Innovation Rashmi Verma
Contribution towards the EconomyContribution to GDP of about 7%Second largest employment generator in the countryReal estate growth gives boost to steel and cement sectorsReal estate is a growth engine for development of over 269 allied industries Rashmi Verma
Causes Of Recession On Real Estate• Uniformity of land laws, slowdown and approval delays, the developers missed to complete their projects within the boom period.• Withdrawing of money from Real Estate sector.• Many companies has given pink slips to their employees Rashmi Verma
Major Player In Real EstateDLFUNITECH GROUPANSALSPARSAVNATH DEVLOPERS Rashmi Verma
Impact on Real Estate Sector• Increase in prices of inputs due to inflation effecting all areas of economy like cement, steel, etc.• Increase in home loan interest rates resulting into additional EMI burden on the borrowers.• Reduction in salaries and layoffs resulting into reduced demand for Real estate• Demand-supply imbalance• Forced correction in prices• Reduction in Commercial Rentals• Projectsâ€™ stagnancy• Slow down in infrastructure projects• Difficulties to raise fund (Failure of Emaar IPO)• Loss of Jobs• Shortage of skill workers Rashmi Verma
Effect on Finance• DLF – 79 % decline in profits & 57 % slide in sales• Unitech 63 % decline in profits & 50 % slide in sales.• Parsavanath, India bulls, HDIL, Akruti, Shobha, Purvankara have reported decline in profits upto 95 %.• Overall 76 % dip in profits & 57 % fall in sales in First Quarter of FY 09-10 over First Quarter of FY 08-09. Rashmi Verma
FUTURE PREDICTIONS Close to $7 billion to $8 billion of venture capital expected to flow into Indian real estate market. A significant increase in project execution through Public- Private-Partnerships. More demand for office and industrial space. Rashmi Verma
BPO CONTRIBUTION IN INDIA• India has revenues of 10.9 billion USD• 30 billion USD from IT and total BPO• 5-6% share of the total BPO Industry• Employs more than 700,000 people• 35 percent of the BPO market worldwide.• Eastern Europe, Philippines, Morocco, Egypt and South Africa have emerged to take a share of the market• market share of the offshore piece• is expected to decline. Rashmi Verma
Impact on BPO Industry• Indian IT and BPO companies to reduce their dependency to US• start marketing their services to other countries like APAC• Tier II IT and BPO companies wil merge with larger IT and BPO companies• Indian outsource vendors will reduce hiring new employees Rashmi Verma
What it means to India• Cost efficiencies and business transformation in companies will likely gain greater precedence than ever• The resilient vendors can build new and differentiated offerings for companies• India may benefit due to higher experience and maturity in these areas.• Cash-starved companies may look to monetise their investments in captive operations• HR outsourcing will provide remediation to some of the staff post Rashmi Verma
“Global Sourcing in Banking, Capital Markets and Insurance.”• The largest untapped opportunities in banking are specialization in transaction processing, account servicing and credit card fraud management• Well-served functions in the capital markets sector that will continue to drive growth include business acquisitions, account servicing, investment operations, registrar and transfer functions and fund Accounting• The largest untapped opportunities in the insurance sector include policy servicing, customer service, finance and accounting, new business acquisition and claims processing• Most financial services companies are now sourcing BPO through captive units in India and the Philippines, however, third-party sourcing also is rising• Financial services buyers are constantly innovating and restructuring delivery models, the latest being a hybrid model where the back-end processes are migrated to third-party suppliers while complex, judgment- intensive functions are retained within the captive• To date, UK insurers are largest adopters of offshore BPO, suggesting significant growth opportunities exist for the U.S. insurance market that is three times the size of the UK market. Rashmi Verma
CONCLUSION OF THE STUDY OF RECESSION & BPO• Existing contracts will continue• Growth in the hard-hit will be limited sectors (especially BFSI).• Sectors, not seeing much slowdown • competition for the few available outsourcing contracts will be strong. Rashmi Verma
Impact on the Indian IT industry• Asia / Pacific is experiencing a deferred impact due to the “domino effect” of the current crisis.• 43% of Western companies are cutting back their IT spend and nearly 30% are scrutinizing IT projects for better returns.• The slowing U.S. economy has seen 70% of firms negotiating lower rates with suppliers and nearly 60% cutting back on contractors.• The IT services and outsourcing market is currently undergoing a structural transformation that will have a profound effect on how IT service providers will have to conduct their business Rashmi Verma
CONCLUSION OF IT SECTOR AND RECESSION• Some opportunities for managing the bottom line• The macroeconomic environment is depressing• The environment looks weakest in a long while,and yet there remain pockets of opportunity. Rashmi Verma