A presentation by
What is a
• A drastic slowing of the economy. Where gross
national or domestic product has fallen in two
• A recession would be indicated by a slowing of a
nation's production, rising unemployment and falling
interest rates, usually following a decline in the
demand for money.
• A popular distinction between recession and
depression is: 'Recession is when your neighbors lose
his job; depression is when you lose yours.
Slowdown in economic
TERMED AS unemployment
The main factor of economic recession 2008-2009 was the new policies
of the us banks which were adopted to increase the profits of banks.
These included :-
U.S. Banks started giving Downfall of U.S.
loans to NINJAS* economy
Started investing in U.S. Banks bankrupt
property because of no payment
Property rates increased As more sellers but NINJAs couldn’t
but had a major fall less buyers pay banks
NINJA* - Non Income Non Job no Assets
Almost everybody today seems to be discussing about the US
Recessionary trend and its impact on emerging countries, more
particularly Indian Economists, Industrialists and the common
man on the streets seem to have been horrified by the very
thought of recession in India and that too due to US.
Decreasing industrial production, inflation, decreasing job
opportunities, cost cutting, reducing purchasing power parity, et
al are the aspects discussed among them through every possible
mode like articles, talks & walks and places like washrooms,
• But to me the reality is very different! Yes......
India will not be impacted largely by the US recession, simply
because India is not which it was in the '80s-'90s. Although it
will be immature on my part to say that India will not be
impacted by the US recession at all, but the truth is that it will
not get impacted adversely in the magnitude of what everyone
• An economy which grows over a period of time tends to slow
down the growth as a part of the normal economic cycle.
• A recession normally takes place when consumers lose
confidence in the growth of the economy and spend less.
• This leads to a decreased demand for goods and services, which
in turn leads to a decrease in production, lay-offs and a sharp
rise in unemployment.
• Investors spend less as they fear stocks values will fall and thus
stock markets fall on negative sentiment.
Impacts in India
• Reduced liquidity in the Indian economy
• Reduced industrial output
• Reduced job opportunities
• Stock Market is lingering in the bottom
Impacts in India
• Real estate market has started to take a beating
• Inflation has increased
• GDP has come down and the GPD forecast for the next
two quarters are only average.
• Change in consumer behaviors and purchasing power
Indian economy 'faces
slowdown not recession'
India is a different economy and known as one of the
most promising economies in terms of growth and
India, with $1.1 trillion or the second largest GDP
among the world's developing economies is treading
on the right path of sustained progress and
development. While most Western economies are
heading toward recession, the Indian GDP growth is
likely to witness a slowdown from 9 percent last year
to 6.5 to 7.5 percent by the year-end.
Change in consumer
behaviors due to
recession in India.
Today's recession has affected all over the world. Due
to the economic slowdown many companies loses their
contract, probably it influence the employees and
fails to get enough money and loosing jobs.
The fact that recession is changing the consumer
behaviors as well as the attitudes in the current
retail market .The customer has become more loyal &
they stick to the supermarket which gives them value
Even during an economic downturn, consumer spending
• However, buyer attitudes and behavior patterns alter
substantially in recession as consumers delay replacing
serviceable products and focus on achieving value for money,
seeking out deals and eliminating indulgences.
• This insight explores how consumers prioritize spending during a
recession and provides implications and recommendations for
Indian Economy & Changes in Consumer Behavior Impact of
Recession due to Recession
Economy of the
The United States has a capitalist mixed economy,
which is fueled by abundant natural resources, a
well-developed infrastructure, and high
productivity. According to the International
Monetary Fund, the U.S. GDP of $14.4 trillion
constitutes 23% of the gross world product at
market exchange rates and almost 21% of the
gross world product at purchasing power parity
(PPP). The largest national GDP in the world, it was
about 5% less than the combined GDP of the
European Union at PPP in 2008. The country ranks
seventeenth in the world in nominal GDP per capita
and sixth in GDP per capita at PPP.
The United States entered 2008
during a housing market correction, a
subprime mortgage crisis and a
declining dollar value. In February,
63,000 jobs were lost, a 5-year
record. In September, 1,59,000 jobs
were lost, bringing the monthly
average to 84,000 per month from
January to September 2008.
In the early months of 2008, many observers believed that a
U.S. recession had begun. The collapse of Bear Stearns and
the resulting financial market turbulence signaled that the
crisis would not be mild and brief.
Alan Greenspan, ex-Chairman of the Federal Reserve, stated
in March 2008 that the 2008 financial crisis in the United
States is likely to be judged as the harshest since the end of
World War II. A chief economist at Standard & Poor's, said
in March 2008 he has a worst-case-scenario in which the
country could endure a double-dip recession in which the
economy would briefly recover in the summer 2008. Under this
scenario, the economy's total output, as measured by the
gross domestic product, would drop by 2.2 percentage points,
making it the third worst recession in the post World War II
period. The former head of the National Bureau of Economic
Research said in March 2008 he believed the country was then
in a recession, and it could be a severe one.
According to numbers published by Bureau of
Economic Analysis in May 2008, the GDP growth of
the previous two quarters was positive. As one
common definition of a recession is negative
economic growth for at least two consecutive fiscal
quarters, some analysts suggest this indicates that
the U.S. economy was not in a recession at the
time. However this estimate has been disputed by
some analysts who argue that if inflation is taken
into account, the GDP growth was negative for the
past two quarters, making it a technical recession.
In a May 9, 2008, report, the chief North
American economist for investment bank Merrill
Lynch wrote that despite the GDP growth reported
for the first quarter of 2008, "it is still
reasonable to believe that the recession started
some time between September and January", on
the grounds that the National Bureau of Economic
Research's four recession indicators all peaked
during that period.
On December 1, 2008, the National Bureau of
Economic Research (NBER) declared that the
United States entered a recession in December
2007, citing employment and production figures as
well as the third quarter decline in GDP.
The Dow Jones Industrial Average lost 679 points
that same day. On January 4, 2009, Nobel prize
winning economist Paul Krugman wrote that "This
looks an awful lot like the beginning of a second
Date Discount Discount Discount Fed Fed funds
rate rate rate funds rate
2008 Primary Secondary
Rate New New Rate New
change interest interest change interest
rate rate rate
Apr 30 -.25% 2.25% 2.75% -.25% 2.00%
Mar 18 -.75% 2.50% 3.00% -.75% 2.25%
Mar 16 -.25% 3.25% 3.75%
Jan 30 -.50% 3.50% 4.00% -.50% 3.00%
Jan 22 -.75% 4.00% 4.50% -.75% 3.50%
U.S. Real GDP in Billions of Current USD.
Courtesy of www.bea.gov
Graphic showing 2008 October bank bailouts by United Kingdom and
United States in billions of dollar equivalents. United Kingdom graphics
are at top, United States below. Green indicates the annual Gross
Domestic Product in 2008, pink indicates the total government spending
in 2008, and grey indicates the various bank rescue payments up to 2008
October 13. The 700 billion dollar US bank rescue of the Emergency
Economic Stabilization Act of 2008 does not include the additional 150
billion dollar additional provisions.
Net job losses in the
• September 2008 2,80,000 jobs lost
• October 2008 2,40,000 jobs lost
• November 2008 3,33,000 jobs lost
• December 2008 9,81,000 jobs lost
• January 2009 7,41,000 jobs lost
• February 2009 6,81,000 jobs lost
• March 2009 6,52,000 jobs lost
• April 2009 5,19,000 jobs lost
• May 2009 3,03,000 jobs lost
• June 2009 4,63,000 jobs lost
• July 2009 2,76,000 jobs lost
• August 2009 2,16,000 jobs lost
• September 2009 2,63,000 jobs lost
• 2008 (September 2008-December 2008) 2.6 million jobs lost
• 2009 (January 2009-present) 2.921 million net
Current unemployment rate: 9.8%
National fiscal policy
response to the late
The financial phase of the crisis led to emergency
interventions in many national financial systems. As
the crisis developed into genuine recession in many
major economies, economic stimulus meant to revive
economic growth became the most common policy tool.
After having implemented rescue plans for the
banking system, major developed and emerging
countries announced plans to relieve their economies.
In particular, economic stimulus plans were announced
in China, the United States, and the European Union.
Bailouts of failing or threatened businesses were
carried out or discussed in the USA, the EU, and
India. In the final quarter of 2008, the financial
crisis saw the G-20 group of major economies assume
a new significance as a focus of economic and
financial crisis management.
United States policy
The Federal Reserve, Treasury, and Securities and
Exchange Commission took several steps on
September 19 to intervene in the crisis. To stop the
potential run on money market mutual funds, the
Treasury also announced on September 19 a new $50
billion program to insure the investments, similar to
the Federal Deposit Insurance Corporation (FDIC)
program. Part of the announcements included
temporary exceptions to section 23A and 23B
(Regulation W), allowing financial groups to more easily
share funds within their group. The exceptions would
expire on January 30, 2009, unless extended by the
Federal Reserve Board. The Securities and Exchange
Commission announced termination of short-selling of
799 financial stocks, as well as action against naked
short selling, as part of its reaction to the mortgage
China has an inverted misery situation in comparison with the United
States. Large Chinese companies are doing better than small and
medium ones, whereas our small and medium companies are doing
better than our larger ones. This is a gross simplification which
depends on whether the companies are centered on domestic or
export markets and a host of other issues, but it is a significant
distinction that underlines the differences in our economies.
• In China, many of the larger companies tend to be focused on
domestic markets, whereas many of their small and medium
enterprises (SMEs), many of which are based in Shanghai (Long
River region) and Guangzhou (Pearl River Area) tended to be
associated with the export market. These areas have suffered the
most and as a result often give visitors a slightly skewed vision of
the economic impact on the current financial crisis on China, mainly
because those are the areas we see.
• Only 10 percent of Chinese exports are under Chinese brands. The
rest are just manufactured for others. When the economic tidal
wave hit, the first casualties were the export manufacturers,
especially those original equipment manufacturers (OEMs), who saw
their orders dry up overnight.
• There are many stories of how unscrupulous business people ran out
their credit lines, shorted their employees, shipped everything of
value to neutral ports and then disappeared. Many of these
companies were owned by foreigners who have departed without a
trace. In all, 10,000 businesses and 2 million people were displaced
in Shenzhen alone during 2008. Although the Chinese government
has compensated the workers and will be keeping an eye out for
those who left, the majority of their efforts seem to be focused
on enforcement of their corporate registration and operation
According to the graphs,
• In 2008, exports represented 40 percent of China’s GDP and
growth was just under 10 percent. In 2009, it is estimated that
growth will slow to between 6 and 7 percent. This is a marked
contrast to most Western economies, where the GDP will go
negative. It underlines that the strength of the Chinese
economy has shifted from its export manufacturing capabilities
to its domestic market growth.
• Keep in mind China’s export market is far from dead. You only
need to visit a local department store in America to see the
number of labels which still read, “Made in China.” In addition,
there are many Chinese companies that had developed niche
markets or had their own branding and distribution systems,
which are using the current situation to expand. The overall
impact on the Chinese economy has been severe, especially in the
areas that had large export-based economies, but it has been
offset by its robust domestic market, which the Chinese
government is vigorously supporting.
• China’s robust domestic growth has its dark spots, such as the real
estate market. The difference is that the Chinese banks going into
the crisis had twice the reserves of our banks, and people in China,
even when they are speculating, tended to pay cash when they
bought property. In terms of their developers, they face losing
their equity, but the banks are not in the double-whammy position
of having to cover the developers and the mortgages of those who
bought the property, as prices decline.
• In terms of China’s domestic market, the main structural difference
is that China’s largest set of companies, the State Owned
Enterprises (SOEs), tend to concentrate on its domestic markets so
they are not feeling the same pressures to lay off workers and
restrict expansion plans as ours are. In the United States, our
large multinational companies, which were inextricably linked to the
global markets for their production and sales, have suffered,
resulting in massive layoffs and economic displacement. In the
United States, the larger companies have traditionally controlled
markets through economies of scale, marketing and sometimes
political clout. The dependence on foreign sources for manufacturing
kept many industries insulated from capital equipment risk for some
parts of their operations, but their sheer size and inflexibility have
made them vulnerable to rapid shifts in economic demand.
• In terms of small and medium enterprises (SMEs), U.S. SMEs
are actually doing better than their larger businesses
counterparts, they tend to be more balanced and/or in niche
markets and many of them are looking to use the downturn to
expand. The major exceptions were those businesses that were
captive suppliers to large industry groups such as the automotive
• China’s SMEs are diverse and tend to run on cash rather than
credit, so while they have suffered setbacks they are not in the
same position as many U.S. companies, which assume that
business ventures will use borrowing to leverage their returns as
part of their business plans. Chinese OEMs, which depended on
the international markets, have suffered.
• The other area to watch is China’s recent $600 billion stimulus
package. It is aimed at boosting domestic demand during the
global financial turmoil, but it will also create opportunities for
the fleet of foot. It is a 10-point massive spending program
emphasizing innovation and structural adjustment. In part, it
translates into buying and developing better technology, and it
will allow Chinese companies to deduct the cost of VAT on
equipment purchases which they could not do before.
• On the U.S. side, the only bright spot I could find was a recent
report on small business confidence by the Small Business
Research Board (SBRB), which indicated that they were
significantly more bullish than they were back in the fourth
quarter of last year.
• So, to answer the question; China is very much alive. The
financial crisis is affecting it, but not the way it is affecting us.
It is clear that China as a market rather than just a source is
the major trend which we need to pay attention to and that
what we see when in Shanghai, Guangzhou and Beijing is only
part of an economic story which is rapidly spreading to the rest
IMPACT OF RECESSION
1. A 15% decline in GDP.
2. Growth of 2% in GDP.
THE RECESSION WELL
• Less dependent on trade and tourism
• Macro economic management.
• Fair shape in banking system.
Proper response to
• Establishing a transparent coordination framework
among financial, monetary and fiscal authorities in
• Establishing swap lines between BI and other central
banks in Asia.
• Ensuring adequate liquidity in the system.
• Maintaining confidence in the banking sector by
providing deposit guarantees,
• Ensuring the availability of funds of support budget
financing in2009 and
• Mitigating the impact of the financial crisis to the
poorest segments of society by providing a social
safety net and through price stabilization policy.
1. State capitalist mixed economy
2. It has an open business environment
On 14 February 2007, the Singapore government announced
that economic growth for the whole year of 2006 was 7.9%,
higher than the originally expected 7.7%.Singapore's
Unemployment rate is around 2.2% as on 20th Feb, 2009
products (GDP) in the world.
• Currency Singapore dollar (SGD)
• Fiscal year 1 April - 31 March Trade organizations WTO, APEC
Statistics GDP $240 billion (2008 ) .
• GDP growth 1.2% (2008) .
• GDP per capita $52,000 (2008 est.) GDP by sector agriculture:
0%, industry: 33.2%,
• services: 66.8% (2008 est.)
• Inflation (CPI) 4.3% (2008).
• Population below poverty line N/A Labour force 2.96 million
(2008 est.) Labour force by occupation.
• manufacturing 18%, construction 6%, transportation and
communication 11%, financial, business, and other services 39%,
other 26% (2003) Unemployment 2.3% (2008 est.)