IMPACT OF GLOBAL RECESSION SHALU

8/7/2019 IMPACT OF GLOBAL RECESSION SHALU

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A Recession is a decline in a country’s grossdomestic product (GDP) growth for two ormore consecutive quarters of a year.

An economy, which grows over a period of

time, tends to slow down the growth as a partof the normal about six months to 2 years.

The economic slowdown of the advancedcountries which started around mid 2007, as aresult of sub prime crisis in USA, led to thespread of economic crisis across the globe.



The US Sub-Prime Crises was thereason for Global Recession

S ub p rime crisis means theborrower is below what is considered aprime candidate for a mortgage

An undervaluation of real risk



Indian financial sector particularly our bankshave no direct exposure to tainted assets andits off-balance sheet activities have been

limited. India’s growth process has been largely

domestic demand driven and its reliance onforeign savings has remained around 1.5 % in

record period.Headline inflation, as measured by the

wholesale price index(WPI), has declinedsharply.



• Rural demand continues to be robust due tomandated agricultural lending and socialsafety net programmes.

• India too has to weather the negative impactof the crisis due to rising two way trade ingoods and services and financial integrationwith the rest of the world.

• On Stock market, Forex market, Moneymarket, Impact on GDP, Reduction in Import-Export, Reduction in employment, Taxation.





• Growth of 9.8% in 2007-08

• Expected growth is 7%but inflationary gap will

reduce.

• 10% Growth in 2010-11

• Best returns from stockmarkets

CHALLENGES AHEAD OF2009

1. Getting inflation undercontrol

2. Spreading the benefits of

growth more equitably.3. Completing investment

projects which areessential for long termdevelopment of economy.

4. Dealing with global

financial uncertainty,which will make capitalflows and exports moredifficult



PLUS↓cost of living

Export goods sold locally

↓products price

↓in real estate helps common man

MINUS– Job Scarcity

– High Retrenchment– Low Liquidity

– Hit in export market



Decline in Sales

September – best month converted into

bad month

Tata, Maruthi Suzuki went under loss



Recession cuts down exports and coolinvestment - before Mumbai Blast

Decline in the economy began beforeattacks

2 of 3 hotels & Café which were targets of attack have reopened the business



In order to address these issues, thegovernment has to effectively and carefullytake up the following steps: -

Enhance coordination and harmonization of the regulatory apparatus internationally, giventhe global scope of the recent crises withincreased cross border financial integration.

Improvement in transparency in the structurecredit instruments.



Reduction in Cash Reserve Ratio (CRR) by

400 basis points from 9.0% in August 2008 to5% in Jan 2009.

Reduction in the Repo Rate (rate which RBI

lends to the banks) by 425 basis points from9.0% as on Oct 19 to 4.75% by July 2009.

Implementation of Basel II W.E.F March 2009by all scheduled commercial banks except

RRBs which would promote closercooperation, information sharing andcoordination of policies among sector wiseregulators, especially in the context of

financial conglomerates.



• I would like to conclude this presentation in the words of” Dr.

RAKESH MOHAN, former Deputy Governor of RBI,”• “As the monetary and fiscal stimuli work their way through and

if calm and confidence are restored in the global markets, wecan see economic turn around later this year.

• Once calm and confidence are restored in the global markets,

economic activity in India will recover sharply. yet there will bea period of painful adjustment which is inevitable.”





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IMPACT OF GLOBAL RECESSION SHALU