RECESSION

(THE INDIAN SCENARIO)

MEANING - In economics, a recession is a general slowdown in economic activity over a sustained period of time, or a business cycle contraction . During recessions, production as measured by gross domestic product (GDP), employment, investment spending, capacity utilization, household incomes and business profits all falls/decreases. Governments usually respond to recessions by adopting measures, such as increasing money supply, increasing government spending and decreasing taxation

THE US SUBPRIME CRISIS
The US housing sector was in a state of a bubble for the past many years. Home mortgage companies used to lend money to people with bad credit risk at higher interest rates because the risk was higher (the very concept of sub prime). When the subprime backed securities were collaterialized, it led to increased defaulters in this subprime borrower sector and the recovery of bad debt (people defaulting on mortgages) increased. This in turn increased the number of foreclosures by home mortgage companies in the US and regular sellers also got affected due to declining prices towards the later stages of 2006.

IMPACT OF GLOBAL RECESSION ON INDIA 
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Recession in the West, specially the United States, is a very bad news for our country. Our companies in India have most outsourcing deals from the US. Even our exports to US have increased over the years. There has been a significant drop in the new hiring which is a cause of great concern for us. Some companies have laid off their employees and there have been cut in promotions, compensation and perks of the employees. Companies in the private sector and government sector are hesitant to take up new projects

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Projections indicate that up to one crore persons could lose their jobs in the correct fiscal ending March. The one crore figure has been compiled by Federation of Indian Export Organisations (FIEO), which says that it has carried out an intensive survey According to official data, industrial growth in august has plummeted to mere 1.3% compared to the same month in 2007 1.3 percent industrial growth is the lowest IIP (index of industrial production) data ever registered since last ten years Federation of Indian chambers of Commerce and Industry (FICCI) found that faced with the global recession, inventories industries like garment, gems, textiles, chemicals and jewellery had cut production by 10 per cent to 50 per cent.

INDIA COUNTER STEPS AGAINST RECESSION

India will get the equivalent of about 4.78 billion dollars as its share of International Monetary Fund's (IMF) Special Drawing Rights (SDR) worth 250 billion dollars to provide liquidity to the recession hit global economic system. The World Bank will provide India an additional $3 billion a year over the next three years as part of a broad plan to make available $100 billion of additional liquidity in that time frame to shore up developing economies India plans to hold a series of road shows abroad, including in Australia, New Zealand and Russia, to showcase the country’s rich diversity and attract tourists, officials said here Wednesday.

Bailout package for Indian industry includes measures like increased spending on infrastructure, insurance cover for exporters. The government is looking at making available special credit lines for specific sectors, like textiles, leather, automobiles and handicraft, which have been hit the most Measures to enhance exports like increasing the post-shipment credit period to 180 days and expanding insurance cover by redefining the export credit guarantee corporation (ECGC) scheme are also taken. Other components of the package where the RBI’s inputs are vital include providing funds to the National Housing Bank to finance small housing and to the non-banking financial corporations to finance various productive activities, especially in the infrastructure sector

The government is likely to contribute Rs 13,000 crore bailout package sought by Air India for restructuring the national carrier.

CONCLUSION – Although, India has been also hit badly by the global recession our government is continuously taking different steps to counter the bad effects in various areas . Acc to various economists and Indian government, these counter steps helps sIndia to come out of this situation very soon ,signs of which are already being noticed .

Anant Saxena

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