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.
 What
Causes
Recession ?
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.
 Reduced spending meant - reduced
activity for most businesses and
consumers.
 Businesses started to layoff workers
(firing people as there was no work).
 Because of layoff
Unemployment started to rise
which resulted in further reduction
in spending by consumer.
Dollar value Stock market
Declined crashed
During the weekend of September
14-15 2008, Lehman Brothers
declared bankruptcy after failing
to find buyers.
Another bank
failure occurred
on September 25
when JP Morgan
Chase agreed to
purchase the
banking assets of
Washington Mutual
 Indian companies have major outsourcing deals
from the US.

 India's exports to the US have also grown

substantially over the years.

 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.
 Recession in jobs availiability and
companies following downsizing in the
existing available staff and cutting down
of the perks and salary corrections.
A slowdown in the us economy is bad
news for India because:-

 Indian companies have major

outsourcing deals from the us.
 India’s export to the US also grown
substantially over the years.
Federation of Indian chambers of
Commerce and Industry (FICCI) found
that faced with the global recession,
inventories industries like garment,
gems, textiles, chemicals and jewellery
had cut production by 10 per cent to 50
per cent.
Banking sector!
 Indian banks are facing through a tough time of liquidity .
Lehman Brothers had invested a great amount in the
stocks of Indian banks that have invested in derivatives.

 Falling down of Lehman had a great impact on the

leading international bank, ICICI Bank, a bank that had
invested in Lehman’s bonds.
 Public should spend wisely and
save more.

 Taxes including excise duty and

custom duty should be reduced.

 In the IT sector, there should be

correction in salary offerings rather
than job cutting.
 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.
 The Repo Rate has been cut by 50 bps to 5.0 % in
Mar, 2009

 The SLR has been cut by 100 bps to 24.0 %

recently.

 The CRR has been cut by 100 bps in two stages.

First 50 bps cut in October 25, 2008 and another
50 bps cut from November 08, 2008. The current
CRR is thus 5.5. The Cash Reserve Ratio (CRR) has
been further cut by 50 basis points from 5.5 per
cent to 5.0 per cent in Jan 2008
Current economic scenario -
Impact of recession on India
 Recession has grabbed almost all
the organisations 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 organisations.
 If I talk about India, here the
situation is still satisfactory if
compare it with other countries
of the world.
 Reserve bank of India (RBI) has
decreased the rate of interest.
CONCLUSION
 Thanks

Queries are
welcome.