Road a head

WHAT IS RECESSION AND HOW IT CAME

IN TO EFFECT?
REASONS BEHIND RECESSION?
VARIOUS THEORIES BEHIND IT?
THE MEASURES TAKEN BY INDIAN
GOVERNMENT?
MONETARY MEASURES
FISCAL MEASURES
CURRENT SCENARIO AND POSITION OF
INDIA
HOW THE WORLD SEES INDIAN MARKETS
IN THE RECESSIONARY AND THE
CURRENT PHASE?
 WHAT IS RECESSION?

• In economics, a recession is a general

slowdown in economic activity over a long period
of time, or a business cycle contraction
• Many macroeconomic indicators vary in a similar
way. Production as measured by
Gross Domestic Product (GDP), employment,
investment spending, capacity utilization,
household incomes, business profits and
inflation all fall during recessions; bankruptcies
and the unemployment rate rises.
Recession my job lost
 REASONS BEHIND RECESSION

Unsustainable lending practices

resulting from the deregulation and
securitization of real estate
mortgages in the United States.
A more broad based credit boom fed a
global speculative bubble in real estate
and equities, which served to reinforce
the risky lending practices
 EFFECTS OF RECESSION?

• A global recession has resulted in a sharp

drop in international trade, rising
unemployment and slumping commodity
prices.
• World trade fall a lot and every country in
world got effected.
Effect of recession
 INDIAN SLOWDOWN NOT THE RECESSION?

India - Managing the Impact of

the Global Financial Crisis
(Speech delivered at the
Confederation of Indian Industry's
National Conference and Annual
Session 2009 in New Delhi on March
26, 2009. - By Duvvuri Subbarao,
Governor)
• Introduction

• Global Outlook

• Decoupling Hypothesis and Emerging Economies

• how India respond on this difficult situation

MEASURES OR HOW INDIA
RESPONDED TO THE SLOW
DOWN?

Both the government and the

Reserve Bank of India responded to
the challenge in close coordination
and consultation
 Measures taken by govt.
MONETARY MEASURES
Reduction in key policy rates

Provision of Rupee liquidity

Provision of forex liquidity and inflow enhancing

measures

BIS Review
97/2009
• Regulatory measures

• FISCAL MEASURES
Fiscal measures
 Tax relief to boost demand
 Increased expenditure on public projects to create
employment and
public assets
 Cost 3.5% of GDP – Rs.1.86 trillion ($37 billion)
 Net borrowing during 2008-09 rose from budgeted Rs.1
trillion ($20 billion) to Rs.2.29 trillion ($46 billion)
 Increase in fiscal deficit from 2.7% of GDP in 2007-08
to 6.2% of GDP in 2008-09
 Net borrowing during 2009-10 budgeted at Rs.3.97
trillion (approx $80 billion)
CURRENT SCENARIO AND POSITION OF
INDIA
First, notwithstanding the severity and multiplicity of the adverse
shocks, India's financial markets have shown admirable resilience.
This is in large part because India's banking system remains
sound, healthy, well capitalized and prudently regulated.
Second, our comfortable reserve position provides confidence to
overseas investors.
Third, since a large majority of Indians do not participate in equity
and asset markets, the negative impact of the wealth loss effect
that is plaguing the advanced economies should be quite muted.
Consequently, consumption demand should hold up well.
Fourth, because of India's mandated priority sector lending,
institutional credit for agriculture has remained unaffected. The
farm loan waiver package implemented by the Government should
further insulate the agriculture sector from the crisis.
Finally, over the years, India has built an extensive network of
social safety-net programmes, including the flagship rural
employment guarantee programme. These uniquely Indian
versions of automatic stabilizers should protect the poor from the
extreme impact of the global crisis.
 HOW THE WORLD SEES INDIAN
MARKETS IN THE RECESSIONARY
AND THE CURRENT PHASE?
• Talk about India, here the situation is still satisfactory if
compare it with other countries of the world.
• Major destination for FIIs and FDIs:
India is back on the radar of global investors even in the
midst of the global financial crisis, with 56 per cent year-on-
year rise in inflows of foreign direct investment in July this
year .
• Biggest market for FMCG and other companies India’s
consumer confidence rated highest amongst the 52
countries researched by neilsen.
• Index again reaching close to 17000 making india a major
destination to invest.
THANK YOU