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澳洲大学经济专业term paper
经济衰退
经济衰退的结果是减少了全球市场的产品需求。经济衰退也通常由于缺乏产品需求，而造成通货紧缩而与价格下跌联系在一起。在西方它也可能是通货膨胀的结果,常伴有价格上涨和经济增长停滞不前。
西方,特别是美国的经济衰退对我们国家来说是一个非常坏的消息。我们印度的公司大多数的外包交易来自美国。甚至这些年我们对美国出口一直在增加，而1月份的出口下降了22%。西方经济的衰退,导致了不景气市场的下滑。这使得新工作大幅度减少，也是引起印度关心的一个原因。西方公司开始大幅度减少晋升、薪酬和员工的福利。一些公司还削减了工作岗位。私营公司以及政府部门都不愿接受任何新的项目。这些公司现在仅仅运营现有额项目工作。预测表明,超过一千万人可能会失去他们的工作。
The result of reduction
Recession
Recessions are the result of reduction in the demand of products in the global market. Recession can also be associated with falling prices known as deflation due to lack of demand of products. Again it could be the result of inflation or a combination of increasing prices and stagnant economic growth in the west.
Recession in the west, especially the United States, is a very bad news for our country. Our companies in India have most outsourcing deals from the us. Even our exports to us have increased over the years. Exports for January have declined by 22 percent. The recession in the west, has resulted in the decline of the recession market. This has resulted in significant drop in the new hiring which is a cause of concern for India. There has been significant cut in promotions, compensation and perks of the employees. Some companies have also cut the jobs. Companies in the private as well as in government sector are hesitant to take up any new projects. The companies are working on the existing projects only. The projections indicate that more than one crore people could lose their jobs .the one crore figure has been compiled by federation of Indian export organisations (FIEO), which says that it carried an intensive survey. The textile, garment and handicraft industry are worse affected. The tourism has also been affected. The real estate has also liquidity problem, where the developers are finding it difficult to raise finances. IT industries , financial sectors , real estate owners , car industry , investment banking and other industries as well are confronting heavy loss due to fall in the global economy. Federation of Indian chambers of commerce and industry (FICCI) found that faced with the global recession, inventories industries like garment, gems textiles, chemicals and jewellery had cut production by 10 % up to 50%.
WHAT CAUSES IT
An economy that grows over a period of time tends to slow down the growth as a part of the normal economic cycle. An economy typically expands for 6- 10 years and tends to go into recession for about six months to two years. A recession takes place when consumers lose confidence in growth of the economy and spend less. This leads to the decrease in demand for goods and services, which in turn leads to the decrease in production, layoffs and a sharp rise in unemployment. Investors are cautious at the time and tend to spend less as they fear stock values will fall and thus stock markets fall on negative sentiment.
"The risk of a recession in the us in 2008 is high and rising. if the US goes into recession , you are going to feel it in Asia. You are going to feel it in India ". The crisis in US would serve as a wakeup call for the central banks all around the world.
Recession should not be confused with depression. Recession means slow down or slump or temporary collapse of a business activity. In its earlier it could be controlled in a methodical manner. Experience helps to avert total collapse. Unchecked, it leads to severe depression. Depression is the dead end. It is the stage of irrevocable economic failure.
When a country is doing well it shows in the growing GDP. Overall economy is bullish. Only stock exchanges don't tell us the rags to riches story but even small businesses. It all adds to the national exchequer. An economist can give a detailed definition of recession but for a layman who has been affected knows is it only one way, when he loses his job and has no money to pay his credits and loans. Recession is when consumer faces foreclosure and the banker comes for his credits. Many companies or whole countries go bankrupt for want of money (liquid funds) and cash flow for even the daily requirements.
Firms face closure when they go through recession as they are not able to recover from losses. If at that time they are not able to sustain their prices and stocks then there is more trouble. Even when the recession period gets over, they may not be able to do well. If a business survives a recession period they should be able to survive a depression. Who will eventually survive recession.
Those that have been able to save their funds.
Those who have not invested in fly by night companies.
Those who remain calm till the recession passes
Those that take stock immediately and decide to reinvest in a recession proof business.
IDENTIFYING THE RECESSION
In 1975 New York times article, economic statistician, "Julius siskin" gave few rules of thumb to identify a recession; one of the rule included the rule of "two successive quarterly declines in GDP. Over the times other rules given by Julius have been largely forgotten and a recession is now identified as the reduction of countries GDP (or negative real economic growth) for at least two quarters. Some economists prefer to interpret it this way like, 1.5 % rise in unemployment within 12 months.
In the United States the business cycle dating committee of the National Bureau of Economic Research (NBER) is generally seen as the authority for dating recessions. The NBER defines an economic recession as "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 (nonfarm payrolls), industrial production, and wholesale retail sales". Almost all academic economists, policy makers and businesses refer to the determination by the NBER for the precise dating of recession's onset and end.
ATTRIBUTES
A recession has many attributes that can occur simultaneously and can include declines in coincident measures of activity such as employment, investment and corporate profits.
A severe or prolonged recession is referred to as an economic depression where GDP is down by 10 % recession is prolonged i.e. three to four years.
CAUSES OF RECESSION
Currency crisis
Energy crisis
War
Under consumption
Overproduction
Financial crisis
Price of fuels
EFFECTS OF RECESSION
Bankruptcies
Credit crunches
Deflation ( or disinflation)
Foreclosures
Unemployment
STOCK MARKET AND RECESSIONS
Some recessions have been anticipated by stock market declines. Siegel mentions that since 1948 , ten recessions were preceded by a stock market decline, by a lead time of 0 to 13 months ( avg. 5.7 months ) while ten stock market declines of greater than 10% in the DJIA were not followed by a recession.
The real estate market also weakens before a recession. However real estate declines can last much longer than recessions.
During the decline, high yield stocks such as FMCGs, pharmaceuticals and tobacco tend to hold better. However when things begin to improve, these growth stocks tend to recover faster.
RECESSION AND POLITICS
Usually what happens, the administration gets the credit or blame for the state of economy during its time.
E.g. the recession of 1981 is considered to have been caused by the policies of Paul Volcker. He was the chairman of the Federal Reserve board. He adopted tight money policy. Ronald Reagan the then president of US supported that policy. Economist Walter Heller, chairman of the council of Economic Advisers in the 1960s said that "I call it a Reagan - Volcker - carter recession .however the taming of inflation at that time, set the stage for robust growth period during Reagan's administration.
It is assumed that govt. has directly or indirectly influence over the presence or degree of recession .it is usually assumed by the economists that that some degree of the recession is unavoidable. Modern govts also take steps to soften the recession. They are sometimes unsuccessful, at least preventing recession and it is difficult to establish whether they make it severe or longer lasting.#p#分页标题#e#
GLOBAL RECESSIONS
IMF regards global recession as a period when global growth is less than 3 % to be global recessions; the IMF estimates that global recession occurs in a cycle every 8 and 10 years. The IMF terms the past three global recessions of the last three decades, global per capita output was zero or negative. Economists at the IMF state that a global recession would take a slowdown in global growth by three percent or less. By this measure, three periods qualify in global recessions since 1985. I.e. 1990-93, 1998 and 2001- 2002.
CURRENT RECESSION IN SOME COUNTRIES
Official economic data shows that a good no of countries are in the state of recession as of early 2009. United States entered the recession at the end of 2007 and so in 2008 saw many others also entering recession.
There were few reasons responsible for US recession. The united states housing market correction (a consequence of united states housing bubbles) and subprime mortgage crisis has significantly contributed to a recession. The 2008 -09 recessions is seeing private consumption fall for the first time in nearly 20 years. The consumer confidence is at a low so it will take long time. Consumers in the US have been hit hard by the current recession. The values of their houses dropping and their pension savings decimated on the stock market. Not only have consumers watched their wealth being eroded, they are also fearing for their jobs as the unemployment rises .
In the US, 63000 jobs have been affected in February 2008, the most in five years. Former Federal Reserve chairman Alan Greenspan said on April 6, 2008 that "there is more than 50 percent chance the United States could go into recession". On October 1, the bureau of economic analysis reported that an additional 156000 jobs had been lost in September. In November 2008, 533000 jobs, were lost, the largest single month loss in 34 years. For 2008, an estimated 2.6 million us jobs were eliminated.
Although the US economy grew in the first quarter by 1% by June 2008 but some analysts stated that due to the protracted credit crisis and "rampant inflation in commodities such as oil, food and steel", the country was nonetheless in the recession. The third quarter of 2008 brought a 0.5% retraction on the GDP, the biggest decline since 2001. The 6.4% decline in spending during Q3 on the non durable goods like clothing and food was the largest dip, since 1950. A Nov. 17 2008 report from Federal Reserve Bank of Philadelphia based on the survey of 51 forecasters suggested that the recession started in April 2008 and will last up to 14 months. They project real GDP declining at an annual rate of 2.9% in the 4th quarter and 1.1% in the first quarter of 2009. These forecasts represent significant downward revisions from the forecasts of three months ago.
OTHER COUNTRIES
Few other countries around the world have also felt the bad effects of the recession. These countries have also seen the rate of growth of GDP decrease, generally attributed to reduced liquidity, price inflation in food and energy and the US slow down. These countries include the United Kingdom, Canada, Japan, Australia, china, India, New Zealand and some other countries. In some cases, the recession has already been confirmed by experts, while others are still waiting for the fourth quarter GDP growth data to show two consecutive quarters of negative growth. India along with china is experiencing an economic slowdown but not a recession.
CURRENT CRISIS IN THE US
The defaults in the payments on subprime mortgages have led to the major crisis in the US. Subprime is a high risk debt offered to the people who have poor credit worthiness or unstable incomes. Many of the US's top banks have landed in trouble after people could not pay back loans.
The housing market in the US grew at a good pace as a result of easy availability of loans. the realty sector boomed for some time but it could not sustain the momentum for a longer period of time as it collapsed under the weight of crippling loan defaults .Foreclosures spread like wildfire putting the us economy on shaky ground . This coupled with rising oil prices at $100 a barrel, added to the slowness in the growth of the economy.
IMPACT OF RECESSION ON INDIA
Recession in the west especially in us is a bad news for India. Indian companies have most outsourcing deals with the US companies. Even the exports have increased over the years. During the recession, exports for January have declined by 22 percent. The India's economy is likely to lose between 1 to 2 percentage points in the GDP growth . Indian companies with big tie ups in US see their profit margins shrinking. The worries for the exporters are growing day by day as the rupee continues to strengthen further as against the dollar. But experts also believe though that long term prospects for India are stable. A weak dollar could bring more foreign currency to Indian markets. Oil may get cheaper that will in turn bring down the growing inflation.
The whole of Asia is directly or indirectly affected by the problems in US, so Asia can be hit by recession because of the recessions in US. Even though domestic demand and diversification of trade in the Asian region will partly counter any drop in the US demand, but one cannot simply escape a downturn in the world's largest economy. The US economy accounts for about 30% of the worlds GDP.
Sudip bandyopadhyay, director and CEO, reliance money says, "in the globalised world complete decoupling is impossible. But India may remain relatively less affected by adverse global events." In fact many of our small companies and medium companies have started developing trade ties with china and European countries to ward off big losses.
Manish sonthalia, Head equity, motilal oswal securities, says if the US economy contracts much more than anticipated, the whole worlds GDP growth which is estimated at 3.7 per cent by the IMF will contract and India would be no exception.
The only good thing is that the recession will happen slowly, maybe in six months or so. As of now, IT and IT enabled services, textiles, jewellery, handicrafts and leather segments will suffer losses because of their trade links. Certain sections of commodities could also face sharp impact due to the volatile nature of these sectors. C.J George, managing director of geojit financial services, says profits of lots of re export firms may be affected. Countries like china imports commodities from India and does some value addition and then exports them to the US.
The IT sector in India will be the worst hit as 75% of its revenues come from US. Low demand for services may also force, top Indian companies to slash their IT budgets. Zinnov consulting, a research and offshore advisory, says that besides companies from IT and BPO's, auto motive components may also be affected.
During the recession, US companies in health care, financial services and all consumers demand driven firms are likely to cut down on their spending. Among other sectors, manufacturing and financial institutions are moderately vulnerable.
Lokendra tomar, senior vice president, Integreon, a BPO firm, says the US recession is likely to have a dual impact on the outsourcing industry. Appreciating money along with the bad situation of US companies (law firms, investment banks and media houses) will affect the bottom line of the outsourcing industry. Small BPO's which are operating at lower net margins (say 7 - 8 %) will find it very difficult to survive.
According to dharmakirti joshi, director and principal economist of CRISIL, "A long and severe recession will seriously affect the portfolio and fixed investment flows. Corporates will also suffer from the volatility in the foreign exchange rates. The export sector will have to devise new strategies to enhance productivity.
But apart from all these things, India's tourism and power industry is going to grow at a better rate. This is good sign for India. India has a huge population so a huge consumer base, so we don't realy has to always depend on US for our growth. In the near future, the India's GDP is expected to grow at a rate of 8.5 - 8.9% which is very good.
CONSEQUENCES OF RECESSION ON INDIAN JOB MARKET
The worst affected by the recession will be the Indian service industry. Under service industry come s BPO, KPO, IT, ITeS etc. Service industry contributes to about 52% of the India's GDP. If service industry gets affected then India's overall growth will also be hampered. Though India is not going to face a major impact due to the US recession. some may say that there is going to be job losses due to the recession and will be talking and will cite the example of TCS firing about 500 employees but there was a reason why these people were fired, TCS fired those employees who didn't perform well and for cost cutting measures, one has to reduce the non performing asset. That's exactly what was done. There is no threat to skilled people in IT/ ITeS.
The recession has given us the opportunity to be innovative and to think out of the box .so that US doesn't affect our robust growth directly. Due to the increasing rupee, exporters are having a hard time, but it may noted that in the past they also got benefit of depreciating rupee. It is time to be innovative and more effective and increase the overall efficiency and go for systematic cost cutting to balance the rupee effect. There is a lot of scope for improvement in west Africa goods at the departmental stores at sold at 5 times than the Indian price. Indian goods are not exported to several West African countries, so it gives good opportunity to our exporters.#p#分页标题#e#
CONCLUSION
The impact of subprime crisis along with a slowdown in mortgages has led to lowering of growth estimates. Since the United States dominates the world economy, so any problem with that economy will have an impact on global economy.
For India it could mean further appreciation in the rupee with respect to US dollar and this would be darkening the business outlook of the companies which are dependent on the US companies. The overall impact of the US slowdown will however be minimal as the factors driving our growth are more local in nature. Unlike rest of Asia, India has a strong domestic market, so any slowdown in the US will have less impact on India. Strong growth in the domestic consumption and significant spending on infrastructure are two pillars of India's growth story. Corporate India is also learning the art of efficient capital management, reduction in costs and delivery of value added services to sustain profit margins. Further interest rates are expected to be stable primarily due to control over inflation and proactive measures undertaken by the RBI.
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