India After Recession

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

REASONS BEHIND RECESSION Unsustainable lending practices resulting from the deregulation and securitization of real estate mortgages in the United States. A more broad based credit boom fed a global speculative bubble in real estate and equities, which served to 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 recession

INDIAN SLOWDOWN NOT THE RECESSION?

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

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Introduction

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Global Outlook

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Decoupling Hypothesis and Emerging Economies

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how India respond on this difficult situation

MEASURES OR HOW INDIA RESPONDED 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. MONETARY MEASURES Reduction in key policy rates Provision of Rupee liquidity Provision of forex liquidity and inflow enhancing measures

97/2009

BIS Review

• Regulatory measures

• FISCAL MEASURES

Fiscal measures  Tax relief to boost demand  Increased expenditure on public projects to create employment and public assets  Cost 3.5% of GDP – Rs.1.86 trillion ($37 billion)  Net borrowing during 2008-09 rose from budgeted Rs.1 trillion ($20 billion) to Rs.2.29 trillion ($46 billion)  Increase in fiscal deficit from 2.7% of GDP in 2007-08 to 6.2% of GDP in 2008-09  Net borrowing during 2009-10 budgeted at Rs.3.97 trillion (approx $80 billion)

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

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