SlideShare ist ein Scribd-Unternehmen logo
1 von 29
Downloaden Sie, um offline zu lesen
What is Recession?
Before, understanding “Recession”,  we need to understand the market economy; A] TWO STAGES OF MARKET ECONOMY  B] TWO FACTORS OF MARKET; - DEMAND & SUPPLY
A1] Growing Market Economy A2] Declining Market Economy A] TWO STAGES OF MARKET ECONOMY
A1] Growing Market Economy Starting Point = Willingness to buy
A2] Declining Market Economy Starting Point = Unwillingness to buy
Producer  wants his demand always to be  high   Consumer  wants his buying cost always to be  low Actually, Demand is the price at which  consumer is  ready to buy  and producer is  ready to sell; B] TWO FACTORS OF MARKET; - DEMAND & SUPPLY Producer Price  Consumer Price Usually, we think;  Demand = Quantity But, here Demand = Price;  This is because,  Price decides the Quantity of Sales; Competitive Price = More Demand; In competitive Price = Less Demand;
Recession  is the economy shrinking for two  consecutive quarters (=6 months) with a decrease in the GDP (=Gross Domestic Product) GDP = Value of all the reported goods and services  produced by the people operating in the country C] What is Recession? GDP = MONEY VALUE OF {C + I + G + (X – M)} C = Consumables,  I = Gross Investments,  G = Government Spending,  X = Exports,  M = Imports
GDP is a good indicator of economy;  Other  indicators could be; -Unemployment Rate -Consumption Rate -Actual Personal Income -Etc.. If GDP is growing, then market is growing due to increased demand; C] What is Recession?
GDP is a good indicator of economy;  Other  indicators could be; -Unemployment Rate -Consumption Rate -Actual Personal Income -Etc.. If GDP is growing, then market is growing due to increased demand; Note : If the recession continues for next quarter, (>6 months) then we go through  “DEPRESSION”  Economy; C] What is Recession?
RECESSION  = WHEN YOUR NEIGHBOR LOSES HIS JOB There is a joke that economists quote to explain the Difference between “Recession & Depression” C] What is Recession? DEPRESSION = WHEN YOU LOSE YOUR JOB
Growing economy has to come down if the production rate of goods & services was more than the actual consumption; D] What is a Business Cycle? What goes up; Has to come down;
E] Why Recession happens? E1] OVER  PRODUCTION E2] LOW CONFIDENCE  LEVEL
A situation in which the  supply exceeds the nation’s  ability to consume what has  been produced; Supply > Demand E] Why Recession happens? PSEUDO DEMAND ACTUAL NEED WAS NOT THERE; WRONG PROJECTIONS COMPANIES  PRODUCED MORE E1] OVER  PRODUCTION
Low Confidence Level  of Millions of  consumers and  producers after they hear many job cuts,  Demand coming down, Companies’ bankruptcy, etc E] Why Recession happens? Consumers are fearing that they may  lose their jobs; So, they have less  confidence to spend money and buy  goods; This will result in reduction in demand in the market; Consumers  start saving money instead of spending  money;  This is a downward spiral in  the economy; E2.1] Word of mouth E2.2] Assignable Cause E2.1] Word of mouth E2] LOW CONFIDENCE  LEVEL
Low Confidence Level  of Millions of  consumers and  producers after they hear many job cuts,  Demand coming down, Companies’ bankruptcy, etc E] Why Recession happens? Consumers are fearing that they may  lose their jobs; So, they have less  confidence to spend money and buy  goods; This will result in reduction in demand in the market; Consumers  start saving money instead of spending  money;  This is a downward spiral in  the economy; E2.1] Word of mouth E2.2] Assignable Cause E2.1] Word of mouth E2] LOW CONFIDENCE  LEVEL Producers do not stock materials, they reduce their productions, gets into the cost reduction activities, worried about the profitability, etc…
Bad Incidences Happening; Example: September 11 Terrorist Attack in US; International Airport block in Thailand; Mumbai Attacked in India;   etc… Series of such incidences leading into a kind of War Please see next slides, for details on business impact; E] Why Recession happens? E2.2] Assignable Cause
Terrorists’ Attack on 11 th  September in US Created fear in people People cancelled their travel plans Airlines & Hotel Industries badly hit Resulted in low occupancy rates Airline & Hotel Industries offered discounts,  gift coupons, to attract people But, still, no improvement in occupancy  rate Airline & Hotel Industries started  “ Cost Reduction” activities CONTINUED  IN NEXT SLIDE
Terrorists’ Attack on 11 th  September in US i] Reduce No. of flights ii] Lay off people iii] Salary reduction to “ Not laid off people” In flight meals reduced Low or No income to  spend and buy goods They became careful due to the fear of loss of job Meals supplying company got the hit Catering company now, lays off people Demand for other goods come down Started saving money instead of spending Demand for other goods come down Airline & Hotel Industries started  “ Cost Reduction” activities
So, you can see how the hit on Airline and Hotel  industries can affect  “Un-related”  industries  in the end; One industry can hit many other industries when the  confidence level of millions of consumers & producers drastically comes down;
Indicators to say a nation is in recession; ,[object Object],[object Object],[object Object],[object Object],[object Object],F] How to know recession?
It is unhealthy for any nation to be in Recession; So, Government will take certain countermeasures  to eliminate or reduce the Effect of recession for turnaround; Important Point:  Today, it is a market Economy Producers; Can produce and  sell at their prices Consumers; Can decide to  buy or not; Both Producers and Consumers are free to act; Not a forced action G] How to come out of recession?
Government has 2 plans Fiscal Policies (By Govt.) Monetary Policies (By RBI) Hence, Government does not have  direct control  on Producers’ & the Consumers’ behavior;  But, they can influence millions of Producers & Consumers with Government’s policies; Government influences the  economy by changing how it (Government) spends  and collects money  RBI manipulates  the available supply of  money in the country G] How to come out of recession?
G] How to come out of recession? Government influences the economy by changing  how it (Government) spends and collects money  1] Tax cuts for  businesses or for individuals More money available for spending Demand picks up; Market  can recover; 2] More Spending  by Govt. to create jobs  Individuals get salary and spend money 3] Automatic  fiscal policy; Unemployment Insurance Some income to unemployed  people to spend Fiscal  Policies
G] How to come out of recession? 1] Reduce reserve ratio  More money available for bank to give loans Demand picks up; Market  can recover; Government manipulates the available supply  of money in the country  Monetary Policies What is Reserve Ratio? Each bank has to keep a  high %  of their assets in  RBI (Reserve Bank of India). These assets do not  earn any interest to banks. This money kept in  RBI is called  “Reserves”;  RBI sets certain ratio  of this reserves and it is called  “Reserve Ratio”
G] How to come out of recession? 1] Reduce reserve ratio  More money available for bank to give loans Demand picks up; Market  can recover; 2] Lower the  interest rates Individuals take more loan Government manipulates the available supply  of money in the country  Monetary Policies
G] How to come out of recession? 1] Reduce reserve ratio  More money available for bank to give loans Demand picks up; Market  can recover; 3] Use its own  reserved   money to buy Govt. bonds It becomes an income to Govt. to inject money into the market Government manipulates the available supply  of money in the country  Monetary Policies 2] Lower the  interest rates Individuals take more loan
I] WOW!!!!!!!! RBI’s Power or Government’s Power is double-edged  sword; Sometimes, their policies to recover from recession  can be counter-productive and it may further worsen the  situation; Nation’s recession is controlled by the actions of  everybody living  in that country; If we advise our people to save money, then, the multiplication effect is that the demand will not pickup and recession will continue; Very peculiar!!!!! But, I  am not misguiding you; Just think from a macro level, if everybody in the country stops spending, what will happen?
Most of the developing Economies like China, India; Currently,  Slow Down Stage; Not yet  in Recession Currently,  in Recession Most of the developed Economies like US, Japan, Germany, etc GDP Growth Rate Down;  But, Still expected to be Around 6% in India GDP Growth Rate Negative;
HOPING THIS TIME RECESSION VANISHES SOON SO THAT INDIA GETS BACK TO ITS STRONGER GDP GROWTH RATE OF  8% TO 10% (THOUGH THE EXPERSTS SAY IT WILL LAST TILL Q3 OF 2009)

Weitere ähnliche Inhalte

Andere mochten auch

ROMARCO Corporate Presentation - April 2013
ROMARCO Corporate Presentation - April 2013ROMARCO Corporate Presentation - April 2013
ROMARCO Corporate Presentation - April 2013Romarco Minerals Inc.
 
Bumperite Sales Brochure
Bumperite Sales BrochureBumperite Sales Brochure
Bumperite Sales Brochurestrama3
 
Dalradian corporate presentation april 2012 final
Dalradian corporate presentation april 2012 finalDalradian corporate presentation april 2012 final
Dalradian corporate presentation april 2012 finalDalradianResource
 
External Flow Example by Optimal Solutions
External Flow Example by Optimal SolutionsExternal Flow Example by Optimal Solutions
External Flow Example by Optimal SolutionsRyan Jenkins
 

Andere mochten auch (7)

ROMARCO Corporate Presentation - April 2013
ROMARCO Corporate Presentation - April 2013ROMARCO Corporate Presentation - April 2013
ROMARCO Corporate Presentation - April 2013
 
trends in online publishing
trends in online publishingtrends in online publishing
trends in online publishing
 
Bumperite Sales Brochure
Bumperite Sales BrochureBumperite Sales Brochure
Bumperite Sales Brochure
 
Dalradian corporate presentation april 2012 final
Dalradian corporate presentation april 2012 finalDalradian corporate presentation april 2012 final
Dalradian corporate presentation april 2012 final
 
Solar Ready Northwest Indiana
Solar Ready Northwest IndianaSolar Ready Northwest Indiana
Solar Ready Northwest Indiana
 
How to write
How to writeHow to write
How to write
 
External Flow Example by Optimal Solutions
External Flow Example by Optimal SolutionsExternal Flow Example by Optimal Solutions
External Flow Example by Optimal Solutions
 

Ähnlich wie What Is Recession

Recession2 by Prof(Dr) Ritesh Amarsela
Recession2 by Prof(Dr) Ritesh AmarselaRecession2 by Prof(Dr) Ritesh Amarsela
Recession2 by Prof(Dr) Ritesh AmarselaProf.Ritesh Amarsela
 
Recession & Financial Crisis In India
Recession & Financial Crisis In IndiaRecession & Financial Crisis In India
Recession & Financial Crisis In IndiaMahesh Samala
 
recession in insurance sector
recession in insurance sectorrecession in insurance sector
recession in insurance sectorguest7499371
 
Macro Eco Project
Macro Eco ProjectMacro Eco Project
Macro Eco ProjectTICS
 
Saurabhrecession
SaurabhrecessionSaurabhrecession
Saurabhrecessionzofishan
 
My recession
My recessionMy recession
My recessioncbpruthvi
 
Global finanacial crisis (mehul)
Global finanacial crisis (mehul)Global finanacial crisis (mehul)
Global finanacial crisis (mehul)shahmakpanchal
 
Deflation
DeflationDeflation
DeflationsAkashs
 

Ähnlich wie What Is Recession (13)

Recession 2008
Recession 2008Recession 2008
Recession 2008
 
Recession2 by Prof(Dr) Ritesh Amarsela
Recession2 by Prof(Dr) Ritesh AmarselaRecession2 by Prof(Dr) Ritesh Amarsela
Recession2 by Prof(Dr) Ritesh Amarsela
 
Recession
RecessionRecession
Recession
 
Recession & Financial Crisis In India
Recession & Financial Crisis In IndiaRecession & Financial Crisis In India
Recession & Financial Crisis In India
 
recession in insurance sector
recession in insurance sectorrecession in insurance sector
recession in insurance sector
 
Macro Eco Project
Macro Eco ProjectMacro Eco Project
Macro Eco Project
 
Saurabhrecession
SaurabhrecessionSaurabhrecession
Saurabhrecession
 
My recession
My recessionMy recession
My recession
 
Global finanacial crisis (mehul)
Global finanacial crisis (mehul)Global finanacial crisis (mehul)
Global finanacial crisis (mehul)
 
G 2 economic_aspect
G 2 economic_aspectG 2 economic_aspect
G 2 economic_aspect
 
Recession
RecessionRecession
Recession
 
Recession on it sector
Recession on it sectorRecession on it sector
Recession on it sector
 
Deflation
DeflationDeflation
Deflation
 

Mehr von Gaurav Narula

Mehr von Gaurav Narula (11)

Responsibility
ResponsibilityResponsibility
Responsibility
 
Who Is Hindering Growth
Who Is Hindering GrowthWho Is Hindering Growth
Who Is Hindering Growth
 
Saving Timeand Money Adl2008
Saving Timeand Money Adl2008Saving Timeand Money Adl2008
Saving Timeand Money Adl2008
 
Poison[1]
Poison[1]Poison[1]
Poison[1]
 
Banana Test English
Banana Test   EnglishBanana Test   English
Banana Test English
 
The Peacock
The PeacockThe Peacock
The Peacock
 
Boardingplanes
BoardingplanesBoardingplanes
Boardingplanes
 
The Nature Of Costs
The Nature Of CostsThe Nature Of Costs
The Nature Of Costs
 
Time Management
Time ManagementTime Management
Time Management
 
97 Ch01
97 Ch0197 Ch01
97 Ch01
 
Od Aki
Od AkiOd Aki
Od Aki
 

Kürzlich hochgeladen

Cracking the ‘Business Process Outsourcing’ Code Main.pptx
Cracking the ‘Business Process Outsourcing’ Code Main.pptxCracking the ‘Business Process Outsourcing’ Code Main.pptx
Cracking the ‘Business Process Outsourcing’ Code Main.pptxWorkforce Group
 
Harvard Business Review.pptx | Navigating Labor Unrest (March-April 2024)
Harvard Business Review.pptx | Navigating Labor Unrest (March-April 2024)Harvard Business Review.pptx | Navigating Labor Unrest (March-April 2024)
Harvard Business Review.pptx | Navigating Labor Unrest (March-April 2024)tazeenaila12
 
NASA CoCEI Scaling Strategy - November 2023
NASA CoCEI Scaling Strategy - November 2023NASA CoCEI Scaling Strategy - November 2023
NASA CoCEI Scaling Strategy - November 2023Steve Rader
 
Q2 2024 APCO Geopolitical Radar - The Global Operating Environment for Business
Q2 2024 APCO Geopolitical Radar - The Global Operating Environment for BusinessQ2 2024 APCO Geopolitical Radar - The Global Operating Environment for Business
Q2 2024 APCO Geopolitical Radar - The Global Operating Environment for BusinessAPCO
 
Building Your Personal Brand on LinkedIn - Expert Planet- 2024
 Building Your Personal Brand on LinkedIn - Expert Planet-  2024 Building Your Personal Brand on LinkedIn - Expert Planet-  2024
Building Your Personal Brand on LinkedIn - Expert Planet- 2024Stephan Koning
 
Michael Vidyakin: Introduction to PMO (UA)
Michael Vidyakin: Introduction to PMO (UA)Michael Vidyakin: Introduction to PMO (UA)
Michael Vidyakin: Introduction to PMO (UA)Lviv Startup Club
 
Entrepreneurship & organisations: influences and organizations
Entrepreneurship & organisations: influences and organizationsEntrepreneurship & organisations: influences and organizations
Entrepreneurship & organisations: influences and organizationsP&CO
 
To Create Your Own Wig Online To Create Your Own Wig Online
To Create Your Own Wig Online  To Create Your Own Wig OnlineTo Create Your Own Wig Online  To Create Your Own Wig Online
To Create Your Own Wig Online To Create Your Own Wig Onlinelng ths
 
ISONIKE Ltd Accreditation for the Conformity Assessment and Certification of ...
ISONIKE Ltd Accreditation for the Conformity Assessment and Certification of ...ISONIKE Ltd Accreditation for the Conformity Assessment and Certification of ...
ISONIKE Ltd Accreditation for the Conformity Assessment and Certification of ...ISONIKELtd
 
Chapter_Five_The_Rural_Development_Policies_and_Strategy_of_Ethiopia.pptx
Chapter_Five_The_Rural_Development_Policies_and_Strategy_of_Ethiopia.pptxChapter_Five_The_Rural_Development_Policies_and_Strategy_of_Ethiopia.pptx
Chapter_Five_The_Rural_Development_Policies_and_Strategy_of_Ethiopia.pptxesiyasmengesha
 
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptx
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptxHELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptx
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptxHelene Heckrotte
 
Upgrade Your Banking Experience with Advanced Core Banking Applications
Upgrade Your Banking Experience with Advanced Core Banking ApplicationsUpgrade Your Banking Experience with Advanced Core Banking Applications
Upgrade Your Banking Experience with Advanced Core Banking ApplicationsIntellect Design Arena Ltd
 
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...IMARC Group
 
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John Meulemans
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John MeulemansBCE24 | Virtual Brand Ambassadors: Making Brands Personal - John Meulemans
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John MeulemansBBPMedia1
 
Developing Coaching Skills: Mine, Yours, Ours
Developing Coaching Skills: Mine, Yours, OursDeveloping Coaching Skills: Mine, Yours, Ours
Developing Coaching Skills: Mine, Yours, OursKaiNexus
 
PDT 89 - $1.4M - Seed - Plantee Innovations.pdf
PDT 89 - $1.4M - Seed - Plantee Innovations.pdfPDT 89 - $1.4M - Seed - Plantee Innovations.pdf
PDT 89 - $1.4M - Seed - Plantee Innovations.pdfHajeJanKamps
 
7movierulz.uk
7movierulz.uk7movierulz.uk
7movierulz.ukaroemirsr
 
Amazon ppt.pptx Amazon about the company
Amazon ppt.pptx Amazon about the companyAmazon ppt.pptx Amazon about the company
Amazon ppt.pptx Amazon about the companyfashionfound007
 

Kürzlich hochgeladen (20)

Cracking the ‘Business Process Outsourcing’ Code Main.pptx
Cracking the ‘Business Process Outsourcing’ Code Main.pptxCracking the ‘Business Process Outsourcing’ Code Main.pptx
Cracking the ‘Business Process Outsourcing’ Code Main.pptx
 
Harvard Business Review.pptx | Navigating Labor Unrest (March-April 2024)
Harvard Business Review.pptx | Navigating Labor Unrest (March-April 2024)Harvard Business Review.pptx | Navigating Labor Unrest (March-April 2024)
Harvard Business Review.pptx | Navigating Labor Unrest (March-April 2024)
 
NASA CoCEI Scaling Strategy - November 2023
NASA CoCEI Scaling Strategy - November 2023NASA CoCEI Scaling Strategy - November 2023
NASA CoCEI Scaling Strategy - November 2023
 
Q2 2024 APCO Geopolitical Radar - The Global Operating Environment for Business
Q2 2024 APCO Geopolitical Radar - The Global Operating Environment for BusinessQ2 2024 APCO Geopolitical Radar - The Global Operating Environment for Business
Q2 2024 APCO Geopolitical Radar - The Global Operating Environment for Business
 
Building Your Personal Brand on LinkedIn - Expert Planet- 2024
 Building Your Personal Brand on LinkedIn - Expert Planet-  2024 Building Your Personal Brand on LinkedIn - Expert Planet-  2024
Building Your Personal Brand on LinkedIn - Expert Planet- 2024
 
Michael Vidyakin: Introduction to PMO (UA)
Michael Vidyakin: Introduction to PMO (UA)Michael Vidyakin: Introduction to PMO (UA)
Michael Vidyakin: Introduction to PMO (UA)
 
Entrepreneurship & organisations: influences and organizations
Entrepreneurship & organisations: influences and organizationsEntrepreneurship & organisations: influences and organizations
Entrepreneurship & organisations: influences and organizations
 
WAM Corporate Presentation Mar 25 2024.pdf
WAM Corporate Presentation Mar 25 2024.pdfWAM Corporate Presentation Mar 25 2024.pdf
WAM Corporate Presentation Mar 25 2024.pdf
 
To Create Your Own Wig Online To Create Your Own Wig Online
To Create Your Own Wig Online  To Create Your Own Wig OnlineTo Create Your Own Wig Online  To Create Your Own Wig Online
To Create Your Own Wig Online To Create Your Own Wig Online
 
ISONIKE Ltd Accreditation for the Conformity Assessment and Certification of ...
ISONIKE Ltd Accreditation for the Conformity Assessment and Certification of ...ISONIKE Ltd Accreditation for the Conformity Assessment and Certification of ...
ISONIKE Ltd Accreditation for the Conformity Assessment and Certification of ...
 
Chapter_Five_The_Rural_Development_Policies_and_Strategy_of_Ethiopia.pptx
Chapter_Five_The_Rural_Development_Policies_and_Strategy_of_Ethiopia.pptxChapter_Five_The_Rural_Development_Policies_and_Strategy_of_Ethiopia.pptx
Chapter_Five_The_Rural_Development_Policies_and_Strategy_of_Ethiopia.pptx
 
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptx
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptxHELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptx
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptx
 
Upgrade Your Banking Experience with Advanced Core Banking Applications
Upgrade Your Banking Experience with Advanced Core Banking ApplicationsUpgrade Your Banking Experience with Advanced Core Banking Applications
Upgrade Your Banking Experience with Advanced Core Banking Applications
 
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
 
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John Meulemans
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John MeulemansBCE24 | Virtual Brand Ambassadors: Making Brands Personal - John Meulemans
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John Meulemans
 
Developing Coaching Skills: Mine, Yours, Ours
Developing Coaching Skills: Mine, Yours, OursDeveloping Coaching Skills: Mine, Yours, Ours
Developing Coaching Skills: Mine, Yours, Ours
 
PDT 89 - $1.4M - Seed - Plantee Innovations.pdf
PDT 89 - $1.4M - Seed - Plantee Innovations.pdfPDT 89 - $1.4M - Seed - Plantee Innovations.pdf
PDT 89 - $1.4M - Seed - Plantee Innovations.pdf
 
7movierulz.uk
7movierulz.uk7movierulz.uk
7movierulz.uk
 
Amazon ppt.pptx Amazon about the company
Amazon ppt.pptx Amazon about the companyAmazon ppt.pptx Amazon about the company
Amazon ppt.pptx Amazon about the company
 
Investment Opportunity for Thailand's Automotive & EV Industries
Investment Opportunity for Thailand's Automotive & EV IndustriesInvestment Opportunity for Thailand's Automotive & EV Industries
Investment Opportunity for Thailand's Automotive & EV Industries
 

What Is Recession

  • 2. Before, understanding “Recession”, we need to understand the market economy; A] TWO STAGES OF MARKET ECONOMY B] TWO FACTORS OF MARKET; - DEMAND & SUPPLY
  • 3. A1] Growing Market Economy A2] Declining Market Economy A] TWO STAGES OF MARKET ECONOMY
  • 4. A1] Growing Market Economy Starting Point = Willingness to buy
  • 5. A2] Declining Market Economy Starting Point = Unwillingness to buy
  • 6. Producer wants his demand always to be high Consumer wants his buying cost always to be low Actually, Demand is the price at which consumer is ready to buy and producer is ready to sell; B] TWO FACTORS OF MARKET; - DEMAND & SUPPLY Producer Price Consumer Price Usually, we think; Demand = Quantity But, here Demand = Price; This is because, Price decides the Quantity of Sales; Competitive Price = More Demand; In competitive Price = Less Demand;
  • 7. Recession is the economy shrinking for two consecutive quarters (=6 months) with a decrease in the GDP (=Gross Domestic Product) GDP = Value of all the reported goods and services produced by the people operating in the country C] What is Recession? GDP = MONEY VALUE OF {C + I + G + (X – M)} C = Consumables, I = Gross Investments, G = Government Spending, X = Exports, M = Imports
  • 8. GDP is a good indicator of economy; Other indicators could be; -Unemployment Rate -Consumption Rate -Actual Personal Income -Etc.. If GDP is growing, then market is growing due to increased demand; C] What is Recession?
  • 9. GDP is a good indicator of economy; Other indicators could be; -Unemployment Rate -Consumption Rate -Actual Personal Income -Etc.. If GDP is growing, then market is growing due to increased demand; Note : If the recession continues for next quarter, (>6 months) then we go through “DEPRESSION” Economy; C] What is Recession?
  • 10. RECESSION = WHEN YOUR NEIGHBOR LOSES HIS JOB There is a joke that economists quote to explain the Difference between “Recession & Depression” C] What is Recession? DEPRESSION = WHEN YOU LOSE YOUR JOB
  • 11. Growing economy has to come down if the production rate of goods & services was more than the actual consumption; D] What is a Business Cycle? What goes up; Has to come down;
  • 12. E] Why Recession happens? E1] OVER PRODUCTION E2] LOW CONFIDENCE LEVEL
  • 13. A situation in which the supply exceeds the nation’s ability to consume what has been produced; Supply > Demand E] Why Recession happens? PSEUDO DEMAND ACTUAL NEED WAS NOT THERE; WRONG PROJECTIONS COMPANIES PRODUCED MORE E1] OVER PRODUCTION
  • 14. Low Confidence Level of Millions of consumers and producers after they hear many job cuts, Demand coming down, Companies’ bankruptcy, etc E] Why Recession happens? Consumers are fearing that they may lose their jobs; So, they have less confidence to spend money and buy goods; This will result in reduction in demand in the market; Consumers start saving money instead of spending money; This is a downward spiral in the economy; E2.1] Word of mouth E2.2] Assignable Cause E2.1] Word of mouth E2] LOW CONFIDENCE LEVEL
  • 15. Low Confidence Level of Millions of consumers and producers after they hear many job cuts, Demand coming down, Companies’ bankruptcy, etc E] Why Recession happens? Consumers are fearing that they may lose their jobs; So, they have less confidence to spend money and buy goods; This will result in reduction in demand in the market; Consumers start saving money instead of spending money; This is a downward spiral in the economy; E2.1] Word of mouth E2.2] Assignable Cause E2.1] Word of mouth E2] LOW CONFIDENCE LEVEL Producers do not stock materials, they reduce their productions, gets into the cost reduction activities, worried about the profitability, etc…
  • 16. Bad Incidences Happening; Example: September 11 Terrorist Attack in US; International Airport block in Thailand; Mumbai Attacked in India; etc… Series of such incidences leading into a kind of War Please see next slides, for details on business impact; E] Why Recession happens? E2.2] Assignable Cause
  • 17. Terrorists’ Attack on 11 th September in US Created fear in people People cancelled their travel plans Airlines & Hotel Industries badly hit Resulted in low occupancy rates Airline & Hotel Industries offered discounts, gift coupons, to attract people But, still, no improvement in occupancy rate Airline & Hotel Industries started “ Cost Reduction” activities CONTINUED IN NEXT SLIDE
  • 18. Terrorists’ Attack on 11 th September in US i] Reduce No. of flights ii] Lay off people iii] Salary reduction to “ Not laid off people” In flight meals reduced Low or No income to spend and buy goods They became careful due to the fear of loss of job Meals supplying company got the hit Catering company now, lays off people Demand for other goods come down Started saving money instead of spending Demand for other goods come down Airline & Hotel Industries started “ Cost Reduction” activities
  • 19. So, you can see how the hit on Airline and Hotel industries can affect “Un-related” industries in the end; One industry can hit many other industries when the confidence level of millions of consumers & producers drastically comes down;
  • 20.
  • 21. It is unhealthy for any nation to be in Recession; So, Government will take certain countermeasures to eliminate or reduce the Effect of recession for turnaround; Important Point: Today, it is a market Economy Producers; Can produce and sell at their prices Consumers; Can decide to buy or not; Both Producers and Consumers are free to act; Not a forced action G] How to come out of recession?
  • 22. Government has 2 plans Fiscal Policies (By Govt.) Monetary Policies (By RBI) Hence, Government does not have direct control on Producers’ & the Consumers’ behavior; But, they can influence millions of Producers & Consumers with Government’s policies; Government influences the economy by changing how it (Government) spends and collects money RBI manipulates the available supply of money in the country G] How to come out of recession?
  • 23. G] How to come out of recession? Government influences the economy by changing how it (Government) spends and collects money 1] Tax cuts for businesses or for individuals More money available for spending Demand picks up; Market can recover; 2] More Spending by Govt. to create jobs Individuals get salary and spend money 3] Automatic fiscal policy; Unemployment Insurance Some income to unemployed people to spend Fiscal Policies
  • 24. G] How to come out of recession? 1] Reduce reserve ratio More money available for bank to give loans Demand picks up; Market can recover; Government manipulates the available supply of money in the country Monetary Policies What is Reserve Ratio? Each bank has to keep a high % of their assets in RBI (Reserve Bank of India). These assets do not earn any interest to banks. This money kept in RBI is called “Reserves”; RBI sets certain ratio of this reserves and it is called “Reserve Ratio”
  • 25. G] How to come out of recession? 1] Reduce reserve ratio More money available for bank to give loans Demand picks up; Market can recover; 2] Lower the interest rates Individuals take more loan Government manipulates the available supply of money in the country Monetary Policies
  • 26. G] How to come out of recession? 1] Reduce reserve ratio More money available for bank to give loans Demand picks up; Market can recover; 3] Use its own reserved money to buy Govt. bonds It becomes an income to Govt. to inject money into the market Government manipulates the available supply of money in the country Monetary Policies 2] Lower the interest rates Individuals take more loan
  • 27. I] WOW!!!!!!!! RBI’s Power or Government’s Power is double-edged sword; Sometimes, their policies to recover from recession can be counter-productive and it may further worsen the situation; Nation’s recession is controlled by the actions of everybody living in that country; If we advise our people to save money, then, the multiplication effect is that the demand will not pickup and recession will continue; Very peculiar!!!!! But, I am not misguiding you; Just think from a macro level, if everybody in the country stops spending, what will happen?
  • 28. Most of the developing Economies like China, India; Currently, Slow Down Stage; Not yet in Recession Currently, in Recession Most of the developed Economies like US, Japan, Germany, etc GDP Growth Rate Down; But, Still expected to be Around 6% in India GDP Growth Rate Negative;
  • 29. HOPING THIS TIME RECESSION VANISHES SOON SO THAT INDIA GETS BACK TO ITS STRONGER GDP GROWTH RATE OF 8% TO 10% (THOUGH THE EXPERSTS SAY IT WILL LAST TILL Q3 OF 2009)