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Recession: The Newspaper Definition
The standard newspaper definition of a recession is a decline in the Gross Domestic Product (GDP) for two or more consecutive quarters.
In economics, a recession is a business cycle contraction, a general slowdown in economic activity over a period of time. During recessions, 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; while bankruptcies and the unemployment rate rise. Recessions are generally believed to be caused by a widespread drop in spending. Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation.
Recession? Depression? What's the difference? How do we know if we're in one?
There is an old joke among economists that states: A recession is when your neighbor loses his job. A depression is when you lose your job. The difference between the two terms is not very well understood for one simple reason: There is not a universally agreed upon definition. If you ask 100 different economists to define the terms recession and depression, you would get at least 100 different answers. I will try to summarize both terms and explain the differences between them in a way that almost all economists could agree with.
Before the Great Depression of the 1930s any downturn in economic activity was referred to as a depression. The term recession was developed in this period to differentiate periods like the 1930s from smaller economic declines that occurred in 1910 and 1913. This leads to the simple definition of a depression as a recession that lasts longer and has a larger decline in business activity.
India is not insulated. it took five years for unemployment to fall back to its original levels. Indian economy is also facing a kind of slowdown. where real GDP fell by 4. low-educated workers and the young are most vulnerable to unemployment in a downturn. with a negative impact on the wider economy: the suspension of competition policy in the United States in the 1930s may have extended the Great Depression Social effects The living standards of people dependent on wages and salaries are more affected by recessions than those who rely on fixed incomes or welfare benefits. Strongest of American. If we use this method then the Great Depression of the 1930s can be seen as two separate events: an incredibly severe depression lasting from August 1929 to March 1933 where real GDP declined by almost 33 percent. However. the last depression in the United States was from May 1937 to June 1938.2 percent. India’s cautious approach towards reforms has saved it from possibly disastrous implications. where real GDP declined by 18. then another less severe depression of 1937-38. then rises again as weaker firms close. European and Japanese companies are facing severe crisis of liquidity and credit. The variation in profitability between firms rises sharply. Impacts of recession Unemployment The full impact of a recession on employment may not be felt for several quarters. A recession is an economic downturn that is less severe. world trade does . and individuals' health and well-being. A depression is any economic downturn where real GDP declines by more than 10 percent. The worst recession in the last 60 years was from November 1973 to March 1975. Impact of recession in India: Global economic meltdown has affected almost all countries. either. Recessions have also provided opportunities for anticompetitive mergers. The United States hasn’t had anything even close to a depression in the post-war period. The truth is. After recessions in Britain in the 1980s and 1990s. Research in Britain shows that low-skilled. The loss of a job is known to have a negative impact on the stability of families. a period of recovery.9 percent.The Difference So how can we tell the difference between a recession and a depression? A good rule of thumb for determining the difference between a recession and a depression is to look at the changes in GNP. Business Productivity tends to fall in the early stages of a recession. Countries such as Finland and Indonesia have suffered depressions in recent memory using this definition. By this yardstick. The prime reason being.
construction companies are going to suffer big time.43% of its work force. transportation. Because of less demand for houses. gems & jewellery. All the economies are interlinked to each other and any major fluctuation in trade balance and economic conditions causes numerous problems for all other economies. Information Technology and BPO. metals and metal products. • • • 5 Lakh people were rendered jobless between October to December 2008. Global recession will also lead to less tourists coming to India. Eight major sectors like textile and garment industry. Industrial slowdown will also affect transport services. industrial growth in august has plummeted to mere 1.3 percent industrial growth is the lowest IIP (index of industrial production) data ever registered since last ten years. • • . Foremost among them is real estate sector. That definitely is cause of concern for policy makers and industries.5% GDP growth in this current year is quite improbable. According to official data. April-august industrial growth rate is 4. Transport companies are likely to witness drastic fall in their business and profits. These three segments account for almost one third of services GDP and because of their current and impending plight.9% which is also the lowest for the first five months of a financial year in 14-year period except 1998 and 2001. This is followed by metals and textile sector which laid off 2. Things are likely to get worst as another 20 percent drop in prices is quite possible in coming six months. our country will face huge problems in achieving even 7. The woes of real estate have spread to construction industry as well.29% of their work force respectively.6% and 1. It is being suspected that.3% compared to the same month in 2007. That will negatively affect tours and travels industry. a member of the PM’s economic advisory council and director of the National Institute of Public Finance and Policy have confessed that India is going through industrial recession. This data also raised fear of low GDP growth of India. construction and mining industries were also included in the survey. Survey on Recession: Labour Bureau of ministry of Labour and Employment has released the findings of a study on the effect of economic slowdown on employment in India.not functions in isolation. Financial services segment is also likely to be a major victim of economic slowdown because of less demand for credit and reduced liquidity in market. 1.9% of their work force losing jobs. To make matters worst. Exporting units had observed a higher decline in employment with gems & jewellery sector shedding 8. gems & jewellery sector again witnessed the maximum decline in employment with 11. Among the domestic sector units. The demand for houses have reduced significantly and property prices across India has registered 15-20% fall.5% growth rate in this fiscal. Several crucial sectors of Indian economy are likely to face serious problems in coming months. attaining 7. • A sample size of 2581 units covering 20 centres across 11 states was taken up for the survey. automobiles.
• This was followed by automobiles and transport sectors who shed 4.03% of their work force. .79% and 4.
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