Road a headRoad a headWHAT IS RECESSION AND HOW IT CAME IN WHAT IS RECESSION AND HOW IT CAME IN TO EFFECT?TO EFFECT?REASONS BEHIND RECESSION?REASONS BEHIND RECESSION?VARIOUS THEORIES BEHIND IT?VARIOUS THEORIES BEHIND IT?THE MEASURES TAKEN BY INDIAN THE MEASURES TAKEN BY INDIAN GOVERNMENT?GOVERNMENT?MONETARY MEASURES MONETARY MEASURES FISCAL MEASURES FISCAL MEASURES CURRENT SCENARIO AND POSITION OF CURRENT SCENARIO AND POSITION OF INDIA INDIA HOW THE WORLD SEES INDIAN MARKETS HOW THE WORLD SEES INDIAN MARKETS IN THE RECESSIONARY AND THE CURRENT IN THE RECESSIONARY AND THE CURRENT PHASE?PHASE?

WHAT IS RECESSION?

• In economics, a recession is a general slowdown in economic activity over a long period of time, or a business cycle contraction

• Many macroeconomic indicators vary in a similar way. Production as measured by Gross Domestic Product (GDP), employment, investment spending, capacity utilization, household incomes, business profits and inflation all fall during recessions; bankruptcies and the unemployment rate rises.

Recession my job lostRecession my job lost

REASONS BEHIND RECESSIONREASONS BEHIND RECESSION

Unsustainable lendingUnsustainable lending practicespractices resulting from the resulting from the deregulationderegulation and and securitizationsecuritization of real estat of real estate e mortgagesmortgages in the United Statesin the United States..

A more broad based credit boom fed A more broad based credit boom fed a global speculative bubble in real a global speculative bubble in real estate and equities, which served to estate and equities, which served to reinforce the risky lending practices reinforce the risky lending practices

EFFECTS OF RECESSION?

• A global recession has resulted in a sharp drop in international trade, rising unemployment and slumping commodity prices.

• World trade fall a lot and every country in world got effected.

Effect of recessionEffect of recession

INDIAN SLOWDOWN NOT THE RECESSION?INDIAN SLOWDOWN NOT THE RECESSION?

India - Managing the Impact of India - Managing the Impact of the Global Financial Crisisthe Global Financial Crisis(Speech delivered at the (Speech delivered at the Confederation of Indian Industry's Confederation of Indian Industry's National Conference and Annual National Conference and Annual Session 2009 in New Delhi on March Session 2009 in New Delhi on March 26, 2009. - By Duvvuri Subbarao, 26, 2009. - By Duvvuri Subbarao, Governor) Governor)

• Introduction

• Global Outlook

• Decoupling Hypothesis and Emerging Economies

• how India respond on this difficult situation

MEASURES OR HOW INDIA RESPONDED MEASURES OR HOW INDIA RESPONDED TO THE SLOW DOWN? TO THE SLOW DOWN?

Both the government and the Reserve Bank of India responded to the challenge in close coordination and consultation

Measures taken by govt.Measures taken by govt.MONETARY MEASURESMONETARY MEASURES

Reduction in key policy ratesReduction in key policy rates

Provision of Rupee liquidityProvision of Rupee liquidity

Provision of forex liquidity and inflow Provision of forex liquidity and inflow enhancing measuresenhancing measures

BIS Review 97/2009BIS Review 97/2009

• Regulatory measures

• FISCAL MEASURES

Fiscal measuresFiscal measures

Tax relief to boost demand Tax relief to boost demand Increased expenditure on public projects to create Increased expenditure on public projects to create

employment and employment and public assets public assets

Cost 3.5% of GDP – Rs.1.86 trillion ($37 billion) Cost 3.5% of GDP – Rs.1.86 trillion ($37 billion) Net borrowing during 2008-09 rose from budgeted Rs.1 Net borrowing during 2008-09 rose from budgeted Rs.1

trillion ($20 billion) to Rs.2.29 trillion ($46 billion) trillion ($20 billion) to Rs.2.29 trillion ($46 billion) Increase in fiscal deficit from 2.7% of GDP in 2007-08 Increase in fiscal deficit from 2.7% of GDP in 2007-08

to 6.2% of GDP in 2008-09 to 6.2% of GDP in 2008-09 Net borrowing during 2009-10 budgeted at Rs.3.97 Net borrowing during 2009-10 budgeted at Rs.3.97

trillion (approx $80 billion) trillion (approx $80 billion)

CURRENT SCENARIO AND POSITION OF CURRENT SCENARIO AND POSITION OF INDIAINDIA

First, notwithstanding the severity and multiplicity of the adverse First, notwithstanding the severity and multiplicity of the adverse shocks, India's financial markets have shown admirable resilience. shocks, India's financial markets have shown admirable resilience. This is in large part because India's banking system remains This is in large part because India's banking system remains sound, healthy, well capitalized and prudently regulated.sound, healthy, well capitalized and prudently regulated. Second, our comfortable reserve position provides confidence to Second, our comfortable reserve position provides confidence to overseas investors. overseas investors. Third, since a large majority of Indians do not participate in equity Third, since a large majority of Indians do not participate in equity and asset markets, the negative impact of the wealth loss effect and asset markets, the negative impact of the wealth loss effect that is plaguing the advanced economies should be quite muted. that is plaguing the advanced economies should be quite muted. Consequently, consumption demand should hold up well.Consequently, consumption demand should hold up well. Fourth, because of India's mandated priority sector lending, Fourth, because of India's mandated priority sector lending, institutional credit for agriculture has remained unaffected. The institutional credit for agriculture has remained unaffected. The farm loan waiver package implemented by the Government should farm loan waiver package implemented by the Government should further insulate the agriculture sector from the crisis.further insulate the agriculture sector from the crisis. Finally, over the years, India has built an extensive network of Finally, over the years, India has built an extensive network of social safety-net programmes, including the flagship rural social safety-net programmes, including the flagship rural employment guarantee programme. These uniquely Indian employment guarantee programme. These uniquely Indian versions of automatic stabilizers should protect the poor from the versions of automatic stabilizers should protect the poor from the extreme impact of the global crisis. extreme impact of the global crisis.

HOW THE WORLD SEES INDIAN MARKETS IN THE RECESSIONARY

AND THE CURRENT PHASE?• Talk about India, here the situation is still satisfactory if

compare it with other countries of the world. • Major destination for FIIs and FDIs:  India is back on the radar of global investors even in the

midst of the global financial crisis, with 56 per cent year-on-year rise in inflows of foreign direct investment in July this year .

• Biggest market for FMCG and other companies India’s consumer confidence rated highest amongst the 52 countries researched by neilsen.

• Index again reaching close to 17000 making india a major destination to invest.

LOOKING TOWARDS INDIA WITH HOPE

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