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ECONOMIC RECESSION

IN INDIA & SURVIVAL


STRATEGIES

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

As sure as the spring will follow the winter, prosperity and economic growth will
follow recession.
INTRODUCTION
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.”

Cont....
 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
sales
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
profits.
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
recession.
 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
counting.
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)
Contd…
 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
earnings.)
 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
business
 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!


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