Impact of Recession on Indian Economy IntroductionRecession are the result of reduction in the demand of products in the Global market.

Recession can also be associated with falling prices known as deflection due to lack of demand of products. Again it could be the result of inflation or a combination of incriasing prices & segment economic growth in the west. Almost everybody today seems to be discussing about the US Recessionary trend and its impact on emerging countries, more particularly Indian Economists, Industrialists and the common man on the streets seem to have been horrified by the very thought of recession in India and that too due to US. Decreasing industrial production, inflation, decreasing job opportunities, cost cutting, reducing purchasing power parity, etc. all are the aspects discussed among them through every possible mode like articles, talks & walks and places like washrooms, canteens, etc But to me the reality is very different! Yes...... India will not be impacted largely by the US recession, simply because India is not which it was in the '80s-'90s.Although it will be immature on my part to say that India will not be impacted by the US recession at all, but the truth is that it will not get impacted adversely in the magnitude of what everyone feels. What is a recession? A drastic slowing of the economy. Where gross national or domestic product has fallen in two consecutive quarters. A recession would be indicated by a slowing of a nation's production, rising unemployment and falling interest rates, usually following a decline in the demand for money. A popular distinction between recession and depression is: 'Recession is when your neighbors lose his job; depression is when you lose yours. What causes it? An economy which grows over a period of time tends to slow down the growth as a part of the normal economic cycle.

A recession normally takes place when consumers lose 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... Background of the Global Financial Crisis;What is it all about? It all began with the one and all American dream, that every American should have a home. Regardless of who you are and what you do, if you are an American, you should have something called a home. Real Estate business was in a boom, and financial agents thought that there wasnt a better time to give away loans. The Household sector was given a boost with increased monetary supply by commercial financial companies, and people were given loans regardless of the credit rating they received. It was never expected that the boom in the Real Estate business would come to such an abrupt end, and the prices would reach all time low. The US economy being a capitalist driven economy didnt bother to indulge itself in the policies pursued by the then prominent financial giants. Gradually these financial giants in this business started feeling the heat as sub-prime clients started defaulting in their repayment of loans. The properties which were mortgaged by the clients werent even covering the principal amount of the loan, leave alone the interest commitments. The credit offered to the people in indiscriminate fashion, achieving short term goals and ignoring warnings from leading economists about long term sustainability of the policy, backfired completely and companies like Lehman Brothers, Merrill Lynch, Freddie Mac and Fannie Maes bad assets reached magnanimous proportions. An acute credit shortage was experienced in the economy, and simultaneous negative effects started occurring. The credit crunch meant that borrowing interest rates shot up in the market, companies slowed down their

investment policies, production declined, lay offs increased, consumption decreased and the whole economy followed the downward spiral. The unemployment rate in the US reached an all time high of 6.1% and industrial growth saw its largest decline in the past three years and fell to 1.1%. The US governments realized the... Introduction: There has been constant fluctuation in the exchange rate of US Dollar (USD) versus the Indian Rupee (INR) in the last few months. From the year high of Rs. 51.88/$ in April 09 it has declined to Rs. 46.99/$ in the first week of November 09. A lot is being debated about the impact this fluctuation on the Indian Economy. We shall take an overview of Forex - Inflow and Outflow, mainly in conjunction with the Dollar Trade and the effect of USD-INR Exchange rates. The Forex rates are determined by market forces and are based on demand & supply of these currencies. If supply exceeds the demand, the value of the currency depreciates, as is the case with US Dollar against the Indian Rupee (INR), since there is a huge inflow of foreign capital into India in USD. Impact on Indian Economy: The main Inflow and Outflow can be categorized as follows:Main USD Inflow: 1. Export earnings: 2. IT Sector Earnings 3. NRI Remittances 4. Foreign Direct Investments (FDI) 5. Portfolio Investment 6. Loans from other governments, IMF, World Bank, etc 7. External Commercial Borrowings (ECB) THE RECESSION India is facing the position of recession as globalization showing its negative scenario. As

it was started in US and now it's touching the boundary of India also. Recession is a phase in which rupee depreciate, cash crunches, money market slowdown, inflation comes. All in all it's become difficult to bring money from the pocket of an individual. As we know price of the steel, iron goes up, we would like to postpone our purchasing but if we won't spend, how producer could makes his bread. If the producer starts reducing the price of the commodity with such belief that customer buy the product in all case. This will bring only when he starts cutting its cost of production. Cost cutting means reduction in variable cost. As price of steel, iron, equipments, machinery, are touching sky, only way to reduce the cost is the reduction in employees. Hence people fear of their job security. In fear of the job security, people are generally shifting their purchasing. All of them either producer, investor, customer, employee posing each other to create recession Negative Aspect of Recession on Indian Economy As recession have various negative effects on Indian economy. The capital market was facing the downfall, liquidity is dropping down, an individual don't have money to spend, producers are increasing their price, but to cope with market they are creating deployment. Positive effect of recession on Indian economy The recession in US led to decrease in demand... Economic Slowdown/Recession of 2008The recent slowdown (2008) in the North American macroeconomic environment also follows the same trends as its predecessors. Typically an economic slowdown is defined as an economy which has Declining aggregate demand Contracting employment/rising unemployment Sharp fall in business confidence & profits including a reduction in investment spending

 Reduced inventory levels and heavy discounting, Falling demand for imports Increased government borrowing Lower central banks interest rates.