This document discusses the recession in the US and its impact on the Indian economy. It first defines recession and explains how the US recession was caused by factors like subprime mortgage crisis and rising oil prices. It then discusses how the US recession negatively impacted several sectors in India like IT outsourcing, stock markets, exports and real estate. The government took several steps to mitigate the effects, like decreasing interest rates. While many sectors slowed down initially, the Indian economy was able to recover better than other countries due to corrective measures.

1. RECESSION AND ITS IMPACT ON
INDIAN ECONOMY

2.  Introduction.
 What is Recession and who declare it.
 Causes of recession and crises in the U.S
 Impact of Global Recession on India.
 Steps taken to Check Recession.
 Current economic scenario - Impact of recession on
India.

3.  Recession loomed over the United States.
 And as the saying goes, whenever the US sneezes,
the world catches a cold. This became true when
Indian markets crashed because of recession in the
US and allover the globe.
 Weakening of the American economy was bad
news, not just for India, but also rest of the world
too.

4. What is Recession ? And who Declares
it.

5.  An economy typically expands for 6-10 years and tends to go
into a recession for about six months to 2 years.
 A recession normally takes place when consumers loose
confidence in the growth of the economy and spend less.
 This leads to a decreased demand for goods and services, which
in turn leads to a decrease in production, lay-offs and a sharp
rise in unemployment.
 Investors spend less as they fear stocks values will fall and thus
stock markets fall on negative sentiment.

6. CAUSES OF CRISES IN UNITEDCAUSES OF CRISES IN UNITED
STATESSTATES
• 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.

7.  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
Impact of Recession on IndiaImpact of Recession on India

9.  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.
SHARE MARKETSHARE MARKET

10.  Recruitment by IT companies at premier institutes has gone
down at a sublime rate of 40% decrease in their recruitment in
2008.
 IT companies were predicted a drop of 15% in growth from
30% in BPO sector.
 India's outsourcing industry slowed down.

11. 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

12.  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.

13.  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%.

14.  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.

15.  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

16.  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.

17.  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.

18.  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.
Corrective Steps taken to Check Recession

19.  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.

20.  Reserve bank of India (RBI) has decreased the rate of interest.
 SBI and ICICI and many other private and government banks are
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 booming up.
recession.
Contd…