Recession ’ s effect

on indian foreign
trade
Introduction
 The economic slowdown of the advanced
countries which started around mid-2007, as a
result of sub-prime crisis in USA, led to the
spread of economic crisis across the globe.
According to the current available assessment
of the IMF, the global economy is projected to
contract by 1.4 per cent in 2009.Even as
recently as six months ago, there was a view
that the
 fallout of the crisis will remain confined only
to the financial sector of advanced economies
and at the most there would be a shallow effect
on emerging economies like India.
Meaning Of Recession

A recession is a decline in a country's gross

domestic product (GDP) growth for two or
more consecutive quarters of a year. A
recession is also preceded by several
quarters of slowing down. An economy, which
grows over a period of time, tends to slow
down the growth as a part of the normal
economic cycle. An economy typically
expands for 6-10 years and tends to go into a
recession for about six months to 2 years. A
recession normally takes place when
consumers lose confidence in the growth of
the economy and spend less. If the recession
continues for next quarter than the economy
 Impact On Indian Foreign
Trade
Reduction In


Export
During 2008-09, the growth
in exports was robust till
August 2008. However, in
September 2008, export
growth evinced
a sharp dip and turned
negative in October 2008
and remained negative till
the end of the financial
year . For the first
time in seven years, exports

have
declined in absolute terms

in October 2008. S o u rce : E co n o m ic S u rve y 2 0 0 9 , G o ve rn m e n t

o f In d ia
Quarterly Export Growth in
2008 - 09
The above chart show
that the exports have
declined since October
2008 due to contraction
in global demand due to
the synchronized global
recession. Similarly,
imports growth also
witnessed a deceleration
during October-November
2008, before turning
negative thereafter.
The merchandise trade
deficit declined during
2009-10 (April-May) over
the corresponding period
of the previous year,
reflecting the sharper
decline in the imports in
relation to exports. S o u rce : E co n o m ic S u rve y 2 0 0 9 , G o ve rn m e n t
o f In d ia
Effect on Share and
forex market
 
1) share markets were falling: If our share
markets ever touched new heights , it was
due to investments from international banks.
Now that- due to recession banks- faced
shortage of liquidity; they started to withdraw
their investments from India

2) The Indian currency got weakened against
dollar: Before recession, banks continued to
buy stock from India but now they are selling.
The same stock thus converting Rupee into
Dollars and weakening our currency
Analysis of the Associated Chambers
of Commerce and Industry of India
(ASSOCHAM) 
The latest analysis of the ASSOCHAM on Realistic
Exports Vs The Targeted One of US$ 200 Bln for 2008-
09, adds that 7 key export segments such as textiles,
apparels, gems & jewellery, diamonds, brassware,
handicrafts and leather are already reeling under
recessionary trends to sustain their past export
buoyancy. 
These put together constitute the highest export
volumes in India’s total exports from economies of
scale such as America, EU and ASEAN. As a result of
global slowdown especially in these economies,
India’s export market got reduced substantially and on
the other hand, domestic pressures of prevailing
economic conditions on textiles, diamonds, brassware,
handicrafts, carpets etc. is too heavy. 
Conclusion
 To sum up we can say that the global financial
recession which started off as a sub-prime crisis of
USA has brought all nations including India into its
fold. The GDP growth rate which was around nine
per cent over the last four years has slowed since
the last quarter of 2008 owing to deceleration in
employment, export-import, tax-GDP ratio,
reduction in capital inflows and significant outflows
due to economic slowdown. The demand for bank
credit is also slackening despite comfortable
liquidity in the system. Higher input costs and
dampened demand have dented corporate margins
while the uncertainty surrounding the crisis has
affected business confidence leading to the crash