Impact Of

Global Slow Down On India

&
Prospect Of Recovery

Presented By:-
Biraja Prasanna Dash (12)
Kamal Kiran Behera (21)
Preetam Debasis Sahu (34)
Sudhal Kumar Sethy(54)
Shakti Prasad Chhotaray(45)
 Agenda
• What is Recession
• Why Recession happens
• Recession in brief
• Affect around the Globe
• Impact on Indian Economy
• Corrective Measures
• Conclusion
RECESSION
 A decline in a country’s real GDP, or
 Negative real economic growth for 2 or more
successive quarters of a year
 A phase also characterized by unstable stock
markets and fear, pessimism & lack of
confidence in the economy.
 Why Recession happens?
• Over production

• Low confidence level

• A school of thought blames it on “Higher

Savings and Less Expenditure”
Recession in Brief

• US is suffering from the worst financial turmoil

since the Great Depression
• Reasons – Sub-prime Crisis, Rising Oil Prices,
Etc
• Tremors of the slowdown felt all over the
world
• In September 2008, US was officially
announced to be in Recession.
Affect around the Globe
• Globalization

• Dependency of developing countries on the

“Demand” generated from high spending
countries like US has increased

• Huge money (some trillion $)of various FI and

IB are invested in these developing economies
through direct investment and share market.
Cont…
• When these FI`s & IB`s started feeling liquidity crunch,
they started withdrawing money from developing
countries

• With a slowdown in US market many in developing

economies started feeling pinch of cash in their market

• This is the beginning of slowdown in other financial

markets in the world

• Along with slowed down US market many FI`s and IB`s

started withdrawing money from these developing
nations to save there business at home has added fuel to
liquidity crunch
 Impact on India
A slowdown on Us economy is bad news for India because:

• India a major player in the shuttle of Globalization

• Indian companies have major outsourcing deal from the US

• India’s exports to the US have also grown substantially over

the years

• Indian companies with big tickets deals in the US are seeing

their profit margins shrinking
Anatomy of the economic depression
in India
• Share market
– More people have sold the shares in Indian Share Market
than they bought. This added to the fall index of BSE & NSE

– FI have pulled out from stock markets leading to heavy

losses in stock and mutual funds

– Drastic layoff in many industries

– Because of such uncertainty many people saved money in

banks rather investing
Impact Contd…
• Govt. & Pvt. companies were reluctant in
starting new projects and ventures
• Demand Curve fell sharply
• Sales of Car, Bike & Truck declined
• Steel and Other Industries cutting down
production
• Hospitality, Tourism & Airlines affected
severely
Cont…
Sectors affected till now are almost all, reason behind this is:

External Trade of India : 40% of GDP

FII`s Investment in share market declined to : US $
65bn (as of Jan 08)
FDI in India limited to US $ 50 bn (Jan 08) :
Estimates of Annual GDP has been lowered to 6.5%
from 9%
 Figure: India's Export Growth: Quaterly
Comparisons
60.0

40.0

20.0

0.0

-20.0

-40.0
2005-06 2006-07 2007-08 2008-09
Apr-June
Apr-June 34.5 23.6 20.5 37.4
Jul-Sep
Jul-Sep 32.4 30.8 19.2 25.6
Oct-Dec
Oct-Dec 22.5 20.5 33.0 -13.5
Jan-Mar
Jan-Mar 10.8 16.4 41.9 -27.7

Although India is expected to grow, India has not been able to remain
insulated. The impact was strongly felt in Oct-Dec 2008-09 and became
stronger in Jan-March 2009.
Corrective
Measures
 Measures To Reduce The Impact Of
Recession
Govt. & RBI tried to tame the recession by the
controlling the two instruments
• Fiscal policy
– Government influences the economy by changing how
it spends and collects money

• Monetary policy
– RBI manipulates the available supply of money in the
country
Measures…..
Fiscal policy
•Tax cuts for businesses or for individuals
•More Spending by Govt. to create jobs
•Automatic fiscal policy; Unemployment Insurance

Monetary policy
•Reduce the reserve ratio
•Lower the interest rate
•Encourage banks to lend loans to people
.
Contd…..
• As of now Government has taken many concrete fiscal
measures to boost the economy

• Import duty on Steel, Iron and some other metals has

been increased by 5 to 20% to make import of these
items costlier

• Government through some central agencies trying to

increase FII`s & FDI fund flow in India as well as
attracting NRI money

• The monetary measures includes reduction in CRR by

350 bps, Repo by 150 bps and reduction of SLR to 24%
from 25%
Conclusion
• Banking system is in a sound state
• Steps taken by the govt. have shown positive response
• Inflation well under control
• Stock markets have stabilized & improved substantially
• Steps to reduce the fiscal deficit
• Increase in PPP due to 6th pay commission
• India’s growth rate still one of the highest in the world
Contd…..
• Monetary measures – a blessing for producers & consumers
• Companies are registering high profit in last quarter
– e.g Tata Motors, Infosys, Hero Honda

• Recruitment by companies have started at large in many premier

institutes

• Measures taken to improve tourism & encouraging export

• Efforts on setting up of SEZ and increase in FDI

• High business in overseas market

– e.g RBI purchasing 50% of gold from IMF
.
Thank You………