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Recession

``A significant decline in the economic activity spread across the

country, lasting more than a few months, normally visible

in real GDP growth, real personal income, employment (non-farm

payrolls), industrial production, and wholesale-retail sales´

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TYPES OF RECESSION

V Type W Type

U Type L Type

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Causes of recession globally

1. Sub Prime lending crisis

2. Rising oil prices

3. Tightening of liquidity

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Causes of recession

in India

1. Currency crisis

2. Inflation

3. Credit crunch

4. Falling houses prices

5. Loss of confidence

6. Decrease in production & a sharp rise in unemployment

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Examples of recession

1. India¶s IT

export growth is slowing down.

2. Real Estate are finding it difficult to raise finance.

3. Unemployment in diamond jewellery, textiles, leather & many othersectors.

4. Many companies have put their further expansion plans on hold.

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So how did recession begin?

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Subprime mortgage crisis

The reckless lending practices by

financial institutions ± no backgr ound

check.

Failed regulation of Wall Street rating

agencies. Gover nment deregulation- Federal

Reser ve

Encourage the home owners to take

high loans overlooking the interest

rates.

Collapse of the housing bubble.

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How did the recent recession started and

spread acr oss the glo be?

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Loans f or mortgage, credit card, and auto 

were easy to o btain.

Financial innovations called mortgage-

 backed securities (MBS) and collateralized

debt o bligations (CDO) increased.

These enabled institutions and investorsar ound the world to invest in the U.S.

housing market.

As housing prices declined, major glo bal

financial institutions that borr owed and

invested heavily in subprime MBS reported

significant losses.

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During the weekend of Septem ber 14-15, Lehman Br others declared bankruptcy after 

failing to find buyers.

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Bank of America agreed to purchase Merrill Lynch, & consortium of 10 banks created

an emergency fund of at least $70 billion to deal with the effects of Lehman's closure.

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Another bank failure occurred on 

Septem ber 25 when JP Morgan

Chase agreed to purchase the banking assets of Washington

Mutual.

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Effects

1. Unemployment

2. Falling Profitability

3. Falling Stock Market

4. Decline in Consumer Confidence

5. Foreclosure

6. Bankruptcies

7. fall in Investment

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Extent to which organizations have

 been affected by the economic

recession

53% of the com panies sur veyed indicated that their organizations have been somehow 

affected by the economic recession while 32% have been affected severely.

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Highlights of some survey findings

1. Sales of about 53% of the participating companies were just or wellbelow the company¶s expectation in 2008.

2. Profitability of about 57% of the companies were just or well below thecompany¶s expectation in 2008.

3. Productivity of about 45% of the companies was just or well below thecompany¶s expectation in 2008.

4. Export performance of 60% of the companies were just or well belowthe company¶s expectation in 2008.

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What should India do to deal with

Recession?

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Personal Measures

1. Avoid unnecessary and overspending of personal income and wealth.

2. Keep our personal debts down.

3. Work extra hard at work to ensure your job is secured.

4. Be prepared for bad times and invest money wisely to deal withfuture recession.

5. Avoid wastage of food.

6. Avoid switch of jobs during recession.

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Government Measures

1. Crackdown on hoarders and black marketers could help preventprices from rising further.

2. The Government should allow the private sector to import.

3. There is need for simultaneous monitoring of at least the schemesrelating to food and employment of poor.

4. Higher government spending is good in infrastructural andagricultural activities

5. Encourage Import Trade.

6. Maintenance of Buffer Stock 

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Lessons from Recent Recession

For Organizations:

Be aware of the wider economic environment.

Maximize productivity and efficiency.

Understand your market place.

Be adaptable and flexible.Take risks in proportion to your business.

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Continued

For Governments:

Boost infrastructure spending.

Public-private partnership for development of country

Keep check on Bank¶s lending policy.

Actively manage your cash flow.

Create more job opportunities.

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Continued

For Customers/Common Man:

Actively manage your investment accounts.

Budgeting.

Respect your job.

Plan for the future.

Expect the unexpected.

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THANK YOU

Group Members

Aarti Nevrekar- Roll No 9

Deven Prajapati- Roll No 19

Hanoze Malesra- Roll No 29

Kedar Date- Roll No 39

Megha Kotian- Roll No 49

Nikita Haldankar- Roll No 59