Scribd
Upload
152 views10 pages

Recession in India

The document discusses the major recessionary trends in India and ways to overcome it. It defines recession and describes its causes such as decreased consumer confidence and spending. It outlines the impact of the US recession on India through decreased outsourcing deals and exports to the US. The document then details the effects on sectors in India like the stock market, industry, and real estate. It provides corrective steps that can be taken and opportunities for India that may arise from the US recession, such as increased outsourcing from small to medium US enterprises seeking to cut costs.

Uploaded by

Gaurav Khemka
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
152 views10 pages

Recession in India

The document discusses the major recessionary trends in India and ways to overcome it. It defines recession and describes its causes such as decreased consumer confidence and spending. It outlines the impact of the US recession on India through decreased outsourcing deals and exports to the US. The document then details the effects on sectors in India like the stock market, industry, and real estate. It provides corrective steps that can be taken and opportunities for India that may arise from the US recession, such as increased outsourcing from small to medium US enterprises seeking to cut costs.

Uploaded by

Gaurav Khemka
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 10

Major Recessionary Trends in India

and Ways to Overcome It

Presented by –
VAIBHAV GARG
What Is Recession ?

 A Recession is a contraction phase of the business cycle.


 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”.
 For this reason, the official designation of recession may not
come until after we are in a recession for six months or longer.
What Causes Recession ?

 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.
US Crisis Hits India

US faced major crisis because of -


• Subprime mortgage crisis (homeloan 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.
Impact on India

A slowdown in the US economy is bad news for India because:


• Indian companies have major outsourcing deals from the US
• India's exports to the US have also grown substantially over
the years.
• Indian companies with big tickets deals in the US are seeing
their profit margins shrinking.
Anatomy of the economic depression
in India
 Share Market
• More people have sold the shares in the indian share market
than they bought in the recent weeks. This has added to the fall
of sensex to lower points.
• Foreign investors have pulled out from stock markets leading to
heavy losses in stocks and mutual funds
• Stock broking houses are laying-off people
• Because of such uncertainty many people have started saving
money in banks rather than investing
 Industrial sector
• Government and other private companies are reluctant in
starting new ventures and starting new projects.
• Projects that are halfway to completion, or companies that
are stuck with cash flow issues on businesses that are yet to
reach break even, will run out of cash.
• Car, bike & truck sales down
• Steel plants are cutting production
• Hospitality and airlines are hit by poor demand
Corrective Steps to Check Recession

• RBI needs to neutralise the outflow of FII money by


unwinding the market stabilisation securities that it had used
to sterilise the inflows when they happened.
• This will mean drawing down the dollar reserves which is
important at this hour.
• 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.
• Also, the government should try and improve liquidity,while
CRR and SLR must be cut further
• Indian Companies have to adopt a multi-pronged strategy,
which includes diversification of the export markets,
improving internal efficiencies to maintain cost
competitiveness in a tight export market situation
Opportunities in India due to
US recession
• US recession may be a boon for Indian offshore software companies
• The impact of recession is higher to small and medium sized (SMEs)
enterprises whose bottom lines get squeezed due to lack of spending
by consumers
• SMEs in the US are under severe pressure to increase profitability
and business margins to survive. This will force them to outsource
and even have M&A arrangements with Indian firms.
• India is going to be a great beneficiary of this trend which will
minimize the impact of the US recession on Indian industry
• By March 2008, India had received SME outsourcing deals worth $7
billion from the US as against $6.2 billion in the previous year

You might also like