What is recession and how it has effected the world economy

1. RECESSION Group 01

3. Causes of Recession

4. Global Recession

5. Business Cycle Recession

6. Impact on Indian Economy

7. How to come out of Recession

8. Business Opportunities during recession

10. 4 The Colours Recession..? Cont.. DEPRESSION = WHEN YOU LOSE YOUR JOB RECESSION = WHEN YOUR NEIGHBOUR LOSES HIS JOB GDP is a good indicator of economy Other indicators could be: -Unemployment Rate -Consumption Rate -Actual Personal Income -Etc.. If GDP is growing, then market is growing due to increased demand; But If the recession continues for next quarter, (>6 months) then we go through “DEPRESSION” Economy

11. 5 TWO STAGES OF MARKET ECONOMY Growing Market Economy Declining Market Economy

12. 6 Growing Market economy

13. 7 Declining Market economy

14. 8 Why Recession happens? OVER PRODUCTION LOW CONFIDENCE LEVEL PSEUDO DEMAND ACTUAL NEED WAS NOT THERE; WRONG PROJECTIONS COMPANIES PRODUCED MORE A situation in which the supply exceeds the nation’s ability to consume what has been produced; Supply > Demand

15. 9 Why Recession happens? LOW CONFIDENCE LEVEL Word of mouth Assignable Cause Consumers Fear: Jobs; So, they have less confidence to spend money and buy goods; This will result in reduction in demand in the market; Consumers start saving money instead of spending money; This is a downward spiral in the economy Low Confidence Level of Millions of consumers and producers after- many job cuts, Demand coming down, Companies’ bankruptcy, etc

18. 12 Terrorists’ Attack on 11th September in US Airline & Hotel Industries started “Cost Reduction” activities ii] Lay off people i] Reduce No. of flights iii] Salary reduction to “Not laid off people” Low or No income to spend and buy goods In flight meals reduced They became careful due to the fear of loss of job Demand for other goods come down Meals supplying company got the hit Started saving money instead of spending Catering company now, lays off people Demand for other goods come down

19. 13 Ripple Effect The hit on Airline and Hotel Industries affected “Un-related” industries in the end One industry can hit many other industries when the confidence level of millions of consumers & producers drastically comes down

20. 14 Global Recession Global Recession: When global growth is less than 3%. - International Monetary Fund At the end of World War I 1981-82 1990-91 2001-02 2008-09

22. In fact there were two: 1918-19, and 1920-21.

23. The 1920-21 recession saw a significant decline in prices.

24. But the decline in output was relatively mild, and the recession was short, particularly given the decline in prices.

26. The money supply grew by less than expected.

27. The effect was to shift aggregate demand down.

29. The end of the Gulf War and the Cold War brought reduced government spending on the military, thus shifting the aggregate demand curve to the left.

30. At the same time, banks became concerned about their liquidity, giving the S&L crisis at that time.

32. Started showing its true colors in September 2008.

33. Happened due to reckless and unsustainable lending practices.

37. Headline inflation, as measured by the wholesale price index (WPI), has declined sharply.

38. Rural demand continues to be robust due to mandated agricultural lending and social safety-net programmes.

40. 23 How to come out of Recession? Cont.. Government does not have direct control on Producers’ & the Consumers’ behavior; But, they can influence millions of Producers & Consumers with Government’s policies Government has two plans Fiscal Policies (By Govt.) Monetary Policies (By RBI) Government influences the economy by changing how it (Government) spends and collects money RBI manipulates the available supply of money in the country

41. 24 How to come out of Recession? Government influences the economy by changing how it (Government) spends and collects money Fiscal Policies Cont.. More money available for spending Tax cuts for businesses or for individuals Demand picks up; Market can recover Individuals get salary and spend money More Spending by Govt. to create jobs Automatic fiscal policy; Unemployment Insurance Some income to unemployed people to spend

42. 25 How to come out of Recession? Monetary Policies Government manipulates the available supply of money in the country Reduce reserve ratio More money available for bank to give loans Demand picks up; Market can recover; Lower the interest rates Individuals take more loan Use its own reserved money to buy Govt. bonds It becomes an income to Govt. to inject money into the market

43. 26 Why a recession is a good time to start a company A recession forces founders to be frugal. Recessions force entrepreneurs to take another close look at their ideas. Recessions lead to committed start-up teams. Recessions toughen up companies.

44. 27 References http://en.wikipedia.org/wiki/Recession http://www.investorwords.com/4086/recession.html http://www.labnol.org/internet/countries-least-affected-by-economic-recession/8814/ http://en.wikipedia.org/wiki/Subprime_mortgage_crisis King Sarah, Cushman Donald ; Lessons From The Recession: A Management And Communication Perspective Thank You