PRESENTED BY JACOB TOMS 9605744895

INTRODUCTION

• In economics, a recession is a business cycle contraction.• It is a general slowdown in economic activity.•Recession loomed over United States•Recessions generally occur when there is a widespread drop in spending (an adverse demand shock).

•This may be triggered by various events, such as a financial crisis, an external trade shock•Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation.•Macroeconomic indicators such as GDP (gross domestic product), investment spending, capacity utilization, household income, business profits, and inflation fall, while bankruptcies and the unemployment rate rise.

• Investors spend less as they are fear stock value will fall and thus stock market fall on negative•A recession has many attributes that can occur simultaneously and includes declines in component measures of economic activity (GDP) such as consumption, investment, government spending, and net export activity•These summary measures reflect underlying drivers such as employment levels and skills, household savings rates, corporate investment decisions, interest rates, demographics, and government policies.

•A severe (GDP down by 10%) or prolonged (three or four years) recession is referred to as an economic depression, although some argue that their causes and cures can be different. As an informal short hand, economists sometimes refer to different recession shapes, such as V-shaped, U-shaped, L-shaped and W-shaped recessions.•Consumer confidence is one measure used to evaluate economic sentiment.

TYPE OF RECESSION OR SHAPE

•The type and shape of recessions are distinctive.• In the US, V-shaped, or short-and-sharp contractions followed by rapid and sustained recovery, occurred in 1954 and 1990–91 U-shaped (prolonged slump) in 1974–75, and W-shaped, or double-dip recessions in 1949 and 1980–82.

•Korea, Hong Kong and South-east Asia experienced U-shaped recessions in 1997–98, although Thailand’s eight consecutive quarters of decline should be termed L-shaped• Japan’s 1993–94 recession was U-shaped and its 8-out-of-9 quarters of contraction in 1997–99 can be described as L-shaped

PSYCHOLOGICAL ASPECTS

•Recessions have psychological and confidence aspects.•For example, if companies expect economic activity to slow, they may reduce employment levels and save money rather than invest. Such expectations can create a self-reinforcing downward cycle, bringing about or worsening a recession

WHAT CAUSES RECESSION?

•Many factors contribute to an economy's fall into a recession, but the major cause is inflation.• Inflation refers to a general rise in the prices of goods

and services over a period of time.• Inflation can happen for reasons as varied as increased

production costs, higher energy costs and national debt.

• In an inflationary environment, people tend to cut out leisure spending, reduce overall spending and begin to save more.•But as individuals and businesses curtail

expenditures in an effort to trim costs, this causes GDP to decline.•Unemployment rates rise because companies lay off

workers to cut costs. It is these combined factors that cause the economy to fall into a recession.• This lead to a decreased demand for goods and

services•Which in turn lead to a decrease in production

IMPACT OF RECESSION IN INDIA• 1. Reduced liquidity in the Indian economy 

2. Reduced industrial output 3. Reduced job opportunities 4. Stock Market is lingering in the bottom 5. Real estate market has started to take a beating 6. Inflation has increased 7. GDP has come down and the GPD forecast for the next two quarters are only average. 8. Change in consumer behaviors and purchasing power.

CAUSES OF RECESSION•Currency Crisis• Energy Crisis•War•Under Consumption•Over Production• Price Of Fuels

GLOBAL RECESSION

Recession Name

Recession Year

Time Taken

Cause & Impact

Great Depression

1921-1931

10 years

Stock markets crashed worldwide and a banking collapse took place in the U.S This sparked a global downturn, including a second more minor recession in the U.S, The Recession of 1937

1937 Oil Recession

1973-1975

2 years

A quadrupling of oil prices by OPEC coupled with high Government spending due to the Vietnam war lead to stagflation in the U.S

Early 1980’s Recession

1980-1982

2 years

The Indian Revolution sharply increased the price of oil around the world in 1979, causing the 1979 energy crisis.

Recession Name

Recession Year Time Taken Cause & Impact

Early 1990’s Recession

1990-1991 1 year Industrial Production and Manufacturing trade sales decreased in early 1991

Early 2008’s Recession

2008- 2013 5 year The collapse of U.S economy and other related countries

AFFECTS OF RECESSION ON INDIAN BUSINESS• The sectors least affected directly by the slowdown are

Pharmaceuticals , Oil and Gas, FMCG, Media & Entertainment• Those which feel a moderate impact of the global crisis are

Power, Automobiles, Retail, Hospitality and Tourism• The sectors most severely affected are Banks, Financial

Services, Real Estate, Infrastructure and Information Technology

MAJOR SECTORS AFFECTED BY RECESSION• Indian Stock Market• IT and BPO•Banking•Real Estate• Aviation• Textile• Automobile •Hospitality

EFFECT OF RECESSION ON DIFFERENT SECTORS OF THE COUNTRY #SHARE MARKET

•Most people have sold the shares•Foreign investors have pulled out from stock market•The Indian stock market also crashed due to the slowdown in the U.S economy•People choose saving money rather than investing them in stock market

#INFORMATION TECHNOLOGY INDUSTRY

•Recruitment by IT Companies at IIT Kanpur has gone down from 130 students in 2007 and 72 in 2008•IT Companies are predicted a drop in 15% in growth from 30% in BPO Sector•India’s outsourcing industry slowed down

#REAL ESTATE SECTOR•One of the casualties during this time was real estate, building projects were half done all over the countries and in this tight liquidity developers find it difficult to raise finance•The demand for houses had reduced significantly and the property price across India has registered 15-20% fall

#INDUSTRIAL SECTOR•Govt and other private companies are reluctant in starting new ventures and starting new projects•Project were half way to complete or companies got stuck with cash flow were

unable to reach beak even, and were running out of cash•As very less new production were taking place this lead to loss of export details and created unemployment

#BANKING SECTOR•As companies were in loss many banks suffered crisis in recovering loans which in turn had an adverse effect on economy and also created liquidity crunch•Central banks have worked to improve liquidity but were charging higher credit. The interest rates have drastically increased from 11.5% to nearly about 16%•Banks act as important players in the financial markets. They play a vital role in the economy of a country

AUTOMOBILE INDUSTRY

• India is the world’s largest two wheeler manufacturer.• India is the world’s second largest tractor manufacturer.• India has the fourth largest car market in Asia.• India has the world’s largest three wheeler market.• India is the fourth largest Automobile exporter in the world

EFFECT ON AUTOMOBILE INDUSTRY

•TATA MOTORS•MARUTI SUZUKI•MAHINDRA &MAHINDRA

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

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.•This lead to an adverse effect on India’s economy and lead to a long term loss to india’s growth

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 exporters increased the price for the same .•Thus it also lead to hike in price and fall in demand having effect on economy

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 include 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

CURRENT ECONOMIC SCENARIO - IMPACT OF RECESSION IN INDIA• Recession has grabbed almost all the organization of the

world.• Several people have lost jobs – facing 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.• Organizations are cutting cost to stand in the market.• RBI has decreased the rate of interest.• The real estate was doing good business• But now a days the condition of real estate is still worse

because of the recession

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