INDIA
DURING & AFTER RECESSION
Presented By :
Jeetendra Jena
Quote
“We need to worry about the future, since that is where we are going to spend most
of our time” Mark Twain
WHAT IS A RECESSION ? :
A PERIOD OF GENERAL AND SUSTAINED ECONOMIC DECLINE
SPOTTING A RECESSION :
ECONOMIC INDICATORS
GDP
UNEMPLOYMENT.
INFLATION.
STOCK MARKET
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.
Recession In USA
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.
World Leaders
reaction to recession
From everywhere we look, there is work to be done"
"From everywhere we look, there is
work to be done" Obama said in his
inaugural address “The state of the
economy calls for action, bold and
swift, and we will act -- not only to
create New jobs, but to lay a new
foundation for growth," Obama has
proposed a mega stimulus package to
revive the US economy. The plan
proposes to create three to four million
jobs in the US. "Today I say to you that
the challenges we face are real. They
are serious and they are many. They
will not be met easily or in a short span
of time. But know this, America – they
will be met," Obama said.
Mr. Barack Obama President USA
Source:www.ndtv.com
BROWN ADMITS RECESSION COULD LAST UNTIL
2011
Mr. Gordon Brown British
Prime Minister Brown admits
recession could last until 2011
The Prime Minister announced
plans to create 100,000 jobs in
the public sector and promised
fresh moves to force banks to
resume lending to businesses.
He will tour potential
unemployment black spots ……
setting out moves to boost
employment in "green" and hi-
tech jobs. Plans are also being
considered to give cash to
struggling firms…… ……. Mr
Brown conceded the downturn
could last until 2011.
Source:www.belfasttelegraph.co.
uk
AUSTRALIA WILL AVOID
RECESSION
Mr. Kevin Rudd : Rudd
Prime Minister Kevin Rudd
says he is confident Australia
will avoid a recession despite
predictions of rising
unemployment and the global
financial crisis hurting other
countries. The prime minister
said he agreed with Reserve
Bank of Australia (RBA)
deputy governor Ric
Battellino's comments on
Thursday that Australia was
well placed to cope with the
global downturn and could
avoid a recession. Source:
The Sydney Morning Herald
NO QUESTION OF RECESSION IN INDIA:
Manmohan Putting up a brave
front in the face of global
meltdown, Prime Minister
Manmohan Singh said that the
Government is watching the
situation on a ‘day-to-day and
hour-to-hour basis’ and asserted
that there is no question of
recession in India. Replying to
a volley of questions on the
pressures on Indian economy
due to international financial
crisis, Singh said that though
capital outflows were putting
pressure on the liquidity and the
rupee, Indian banking system
was not affected as much as
elsewhere. Source: Indian
Express Mr. Manmohan Singh
Prime Minister India
INDIA
&
RECESSION
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 margin shrinking.
IMPACT ON 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 savingmoney
in banks rather than investing
IT and Real Estate Sector
•Bonuses, perks, lavish parties, and many other benefits
are missing as companies look to cut cost.
•India's IT export growth is also slowering down
•One of the casualties this time are real estate, where
building projects are half-done all over the country and
in this tight liquidity situation
HOW INDIA WILL RIDE THIS RECESSION?
India will surely be affected by the crisis but at the same
time, it will be the first country to
emerge stronger with a solid foundation of
sustained growth.
There are few good reasons for riding this recession
1.FOREIGN DIRECT
INVESTMENT.
Being 10th largest economy in the
World and 3rd in term of
PPP(Purchasing Power Parity), India
has emerged as a potential player for
FDI & NRI investment.
•$16 billion total amount of FDI that
came to India in 2006-2007 and $20
billion in 2007-08.
•India provides highest returns on FDI
than any other country in the World.
•India has a strong English language
base for business purposes
2.EXPORTS
World bank Chief Economist
said that more jobs will be lost
in China than India because
India is less dependent on
exports and he said also
emerging India is in much better
shape in comparison to other
emerging country.
Half a million jobs have been
lost in India and 20 million jobs
have been lost in china in last
quarter of 2008
3.CONSUMPTION
•Consumption accounts for just about 35%
of GDP in China
while it constitutes about 65% of GDP in
India.
India's huge population results in a per
capita income of $3,300 at PPP and $714 at
nominal.
•India has a vast domestic market of 300
million strong middle class population
having a substantial purchasing power and
another 700 million people whose capacity
to purchase is gradually increasing.
•Indian GDP growth rate will moderate from
about 9% to about 6% in 2008-09 while it is
poised to crash from 13% to 6% in China.
That’s why slow and steady is often better.
4.- SIXTH PAY COMMISSION
•Government has recently handed over a pay hike that
ranges from 40% to 100%.
•Employees will get hundreds of thousands of rupees as
Arrears
5.- WELFARE SCHEMES
•National Rural Employment
Guarantee Program
(NREGP) that provides 100
days of employment to the
poor people in rural areas
6.- INTEREST RATES
The PLR rate is still more than 12% and its was 16% in
mid 1990s.
More than 7% of average GDP growth rates of the last
decade come after high interest rates in India
7.HEALTHY BANKS
Europe and US banks have
become habitual for once
mighty and then report
losses.
•Analysts are deeply
worried about Chinese
banking system.
•But no comments from
western analysts and their
ilk about Indian Banks
8.- INDIA INC
Western scholars acknowledge that India holds the advantage
compared to China because of 2 reasons –
2.Most successful India companies are private.
3.They have used capital for more productively and efficiently
than Chinese counterparts.
Most Indian companies are sitting on billions of dollars of
reserves.
AMI(Access Market Information) said SME channel partners
expect 12-13% growth in 2009.
$6 millions for MSME programme to help Orissa unit by
UNIDO(United Industrial Development Organization
9.DEMOCRACY
•India is the largest democratic county in
the world.
That’s why the psychological impact on
Indian
consumers and investors has been for more
sanguine than it has been in others
countries.
•Business pundits say that democratic govt.
is better
than an authoritarian or autocratic one
when it
comes to delivering high growth rates and
economic prosperity.
•India 75th in Forbe’s best nations for
business
ECONOMY AT A GLANCE
Indian economy has registered a growth of 7.4 per cent in 2009-
10,
8.6 per cent year-on-year (y-o-y) growth in its fourth quarter
GDP growth rate of 7.4 per cent in 2009-10
Manufacturing sector grew 7.3% in june 2010
Mining growth at 9.5% in june 2010.
Electricity output decelerated sharply to 3.5%
Financing, insurance, real estate and business services (9.7 per
cent),
The Gross National Income is estimated to rise by 7.3 per cent
in 2009-10 as compared to 6.8 per cent in 2008-09.
The number of registered foreign institutional investors (FIIs)
was 1710 as on May 31, 2010
FII inflow in equity during January to May 2010 was US$
4606.50 million while it was US$ 5931.80 million in debt.
India received foreign direct investment (FDI) worth US$
25,888 million during April-March, 2009-10,
cumulative amount of FDI inflows during August 1991 - March
2010 to US$ 1, 32,428 million
Agriculture is one of the strongholds of the Indian economy and
accounted for 15.7 per cent of the country's gross domestic
product (GDP) in 2008-09, and 10.23 per cent of the total
exports. Employment to 58.2 per cent of the work force.
Source:http://www.ibef.org/artdispview.aspx?in=36&art_id=26289&cat_id=140&page=2
EXPORTS & IMPORTS
Exports grew 36.4% to US$ 17.8 bn in June 2010.
Imports grew at a relative slower pace 23% to US $ 28.3
bn in June 2010.
The per capita income is estimated to grow at 5.6 per
cent in 2009-10.
Capital Goods output expanded at 34%.
Consumer Durables have maintained >20% growth.
