Download - Recession -B.V.Raghunandan
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- 1. Recession & its Impact on Indian Economy - B.V.Raghunandan, SVS College, Bantwal SDM College of Management, Mangalore. February 26, 2009
- 2. Recession: What it Means An economic situation of continuously declining demand resulting in dwindling business and industrial confidence
- 3. Characteristics of Recession
- Reducing Sales and profits
- Increasing Unemployment
- Hesitation of New Investment
- Reducing Government Revenue
- Gold replacing Dollar as Reserve Currency
- Risk free Investments
- Larger Holding of Cash by Institutions
- Lesser FII
- Basic Commodities
- Expectation of Intervention by Government
- 4. Role of Government
- Passive upto 1929-32
- Keynesian Economics
- WTO against any Government Role
- In 2009, no voice of discontent about Government Intervention
- Nationalisation which was a dirty word in Liberalisation has become very much relevant even in the USA
- 5. Genesis of A Recession
- Consequence of a Hyper Industrial Activity
- Very High Level of Speculation
- Huge Turnover in Derivatives
- Real Estate Boom and the Speculation
- Central Banks Efforts in Contraction of Credit
- 6. US Recession
- Collateralised Debt Obligations (CDOs): Started in 1970s by packaging mortgages and selling them as CDOs
- Mortgage Backed Securities(MBSs): In 1983, Larry Fink of First Boston Corporation pioneers MBSs by dividing mortgages on the basis of Risk. Interest varied with Risk. Toxic Debt gave highest Rate of Interest
- 7. US Recession (contd)
- 1990s- Supreme success of MBSs put a lot of money with Banks & Mortgage Houses
- Lenders lower interest rates to 100% sub-prime mortgages. Rising house prices gave a false sense of security in case of defaulters
- Credit Default Swaps (CDSs): In 1997, Blythe Masters of JP Morgan Chase invented CDS, whereby the buyer paid a premium to seller to protect the buyer against default
- 8. US Recession.contd
- Shadow Banking System: Swaps cover mortgages, business loans, credit card debt and student loans
- Transactions through e-mails by speculators, insurance companies, hedge funds and pension funds worldwide
- 2000-03-Alan Greenspan cut Federal Fund Rates from 6% to 1%
- 9. US Recession.contd
- 2004: Government Sponsored lenders Fannie Mae, Ginnie Mae and Freddie Mac have mortgages that are hugely sub-prime
- 2005: Housing Boom-80% of lending is in Shadow Banking
- 2006: Housing Markets begin to collapse
- 2007-08: Banks start failing worldwide
- 10.
- 11. Recession Then & Now
- Government's Determination for Intervention
- International Financial Bodies Determination to Help
- Central Banks Close Monitoring
- Huge Funds Waiting for Deployment
- Third World Countries Less Affected by Recession
- 12. India & Recession
- Export Oriented Units getting Affected
- Reduced FDI & FII Activity
- Lesser Revenue to the Government
- Lesser Foreign Exchange Reserves
- Dull Organised Markets
- Lackluster Employment Markets
- RBIs Close Watch
- 13. Beneficial Impact on India
- Stoppage of the Mad Spree of Westernisation
- Recognition of a Bigger Role to Government
- Questioning the Utility of Derivatives
- Domestic Industries are being Explored by Export Oriented Units
- Lop sided Development is getting Corrected
- Managerial Remuneration is being Revisited
- 14. An Agenda for Management Students
- Be an Entrepreneur
- Follow Blue Ocean Strategy
- Develop a Socially Relevant Business
- Consider CSR to be far more important than profit or Efficiency
- Join Government Departments connected directly with Business & Industry
- 15. THANK YOU