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Presented By:
Rahul Kumar Tiwari
MBA-2nd Sem
IMT, Faridabad

As sure as the spring will follow the winter, prosperity and economic growth will
follow recession.
In economics, the term recession
generally describes the reduction
of a country's gross domestic
product (GDP) for at
least two quarters.
“a period of reduced economic activity.”

 a significant decline in the economic activity spread across
the economy, lasting more than a few months, normally
visible in real GDP growth, real personal income,
employment , industrial production, and wholesale-retail
Attributes of recession
 In macroeconomics, a recession is a negative
real economic growth, for two or more
successive quarters of an year.
 A recession has many attributes that can occur
simultaneously and can include declines in
coincident measures of activity such as
employment, investment, and corporate
Predictors of recession
 In the U.S. a significant  The three-month
stock market drop has change in the
often preceded the unemployment rate and
beginning of a initial jobless claims
 Inverted yield curve
 Index of Leading
(Economic) Indicators
History of recession
 Great Depression - August 1929 to September 1939:
longest (and deepest) recession of the 20th century
 January-July 1980 and July 1981-November 1982: 2
years total
 July 1990-March 1991: 8 months
 March 2001-November 2001: 8 months
 December 2007-March 2009: 15 months and
US Crisis Hits India
 “When the United States sneezes, the rest of the world
may well catch a cold....” Rich Miller.
 US faced major crisis because of:
 Sub prime mortgage crisis.
 Rising oil prices
 Global inflation
 High unemployment rates
 A declining dollar value.
 Capital flight in emerging markets.
Causes Of Recession 2007-2009
 Currency crisis
 Energy crisis
 War
 Under consumption
 Overproduction
Effects of recession
 Bankruptcies
 Credit crunches
 Deflation
 Foreclosures
 Unemployment
 Difficulty in borrowing
 Unemployment
 Falling profitability
 Falling stock market
 Decline in consumer confidence
Impacts Of Slowdown in India:
 A global recession would take a slowdown in global
growth to three percent or less -IMF
 The slowdown in US and other developed nations is
definitely hurting Indian growth story.
 The signs of this can be evidenced from the
tumbling share market (BSE & NSE) which shed
more than 50% since Jan 08.
Impacts Of Slowdown in India:
 Sectors affected till now are almost all, reason
behind this is:
 External Trade of India : 40% of GDP
 FII`s Investment in share market upto Jan 08:
US $ 65 Billion
 FDI in India (Jan 08) : US $ 50 Billion
 Estimates of Annual GDP has been lowered to
7.5% from 9%
Impacts Of Slowdown in India:
 70% of IT export is to US, out of which 40 % is to
Finance Sector
 Many international garment brands are made in
Tirupur” factories in “Tamilnadu” in “India”.
 From Surat in Gujarat, Diamonds are exported to
US and other countries
All these are few examples how India is going
to get affected
Strategies To Deal With……
Survival strategies
 Revaluate your entire pricing structure.
 Go bargain hunting.
 Consider strategic investments.
 Monitor your cash flow.
 Invest in sales and marketing technology.
Survival strategies (Cont.)
 Avoid Underutilisation of employees.
 Be slow to hire and quick to fire new employees to
keep only the best.
 Talk to your bank and other sources of capital.

Think strategically!!!
5 important survival rules that allow you to
profit even in recession
 Recession Survival Rule #1: Sit in an Exit
Row. (Invest for short duration)
 Recession Survival Rule #2: Bet on Income.
(Invest where you earn dividend)
 Recession Survival Rule #3: Build in Safety.
(Bonds are safe game)
 Recession Survival Rule #4: Think booze, bombs,
and butts. (Be it Sin stocks, gaming firms, or
defense contractors - stick with firms that have lower
debt, steady sales growth, and that are posting strong
 Recession Survival Rule #5: Hedge Your Bets.
((ETFs) as the Rydex Inverse S&P 500 Strategy
Inverse Fund (RYURX), which is designed to rise in
value by 1% for every 1% the S&P 500 falls.)
Recession survival strategies for
 An Internet presence is crucial — as Internet sales are likely
to see a significant increase due to rising fuel costs and a desire
by consumers to consolidate excess travel spending.

 Grow your business through acquisition — because a

recession is a good time to acquire property and assets at very
reasonable prices. Your investment is likely to increase and your
business can benefit from the growth and expansion.

 Consider taking your business global — because small

businesses can receive assistance from the U.S. government to
expand into foreign countries.
Adapt to recession
 Project cash flow in advance and monitor budget
 Pressurize debtors to pay up
 Review overheads and improve cost efficiency
 Review stock levels
 Keep up to date with latest financial information
 Think hard before incurring capital expenditure
 Aggressively seek new business
 Be open to new ideas and accept them logically
Analyse “What you are doing?”
 Avoid taking bad business
 Not accept business that cannot cover costs
 Survival is more important than size
 Operate in lean and mean mode
 Aggressively pursue debtors for payment
 Look for talented unemployed people
 Marketing assumes further importance.
What will recession teach us?
 What does not work?

 Risk Management.

 Profitability is important. Valuation is not.

 Strong fundamentals win. Always!