global recession in india

8/14/2019 Global Recession in India

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IMPACTOF

GLOBAL RECESSIONON

INDIA


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IntroductionFear of a recession looms over the UnitedStates, whenever the US sneezes, the worldcatches a cold.

Indian markets crashed taking a cue from a probable recession in the US.

Weakening of the American economy is badnews, not just for India, but for the rest of theworld too.


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What is Recession?Recession is the economy shrinking for two

consecutive quarters (=6 months) with adecrease in the GDP (=Gross Domestic Product)

GDP = Value of all the reported goods and services produced by the people operating in the country

GDP = MONEY VALUE OF {C + I + G + (X M)}

C = Consumables, I = Gross Investments, G = Government Spending,X = Exports, M = Imports


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What is Recession?

GDP is a good indicator of economy; Other indicators could be;-Unemployment Rate-Consumption Rate-Actual Personal Income-Decrease in factory production-An Unhealthy stock market

If GDP is growing, then market is growing due toincreased demand;


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What is Recession?There is a joke that economists quote to explain theDifference between Recession & Depression

RECESSION

= WHEN YOUR NEIGHBOR LOSES HIS JOB

DEPRESSION

= WHEN YOU LOSE YOUR JOB


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What is a BusinessCycle?

What goes up; Has to comedown;

Growing economy has tocome down if the productionrate of goods & services was more thanthe actual consumption;

What goes up; Has to comedown;


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What causes it?

An economy grows over a period of time tends to slow downthe growth as a part of the normal economic cycle

when consumers lose confidence in the growth of theeconomy and spend less.

Leads to a decreased demand for goods and services

Leads to a decrease in production, lay-offs and a sharp rise inunemployment.


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Why Recession happens?

OVERPRODUCTION

LOWCONFIDENCELEVEL


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Stock markets &Recession

Stock markets reflect the buoyancy of theeconomy.

Recession is yet to be declared by the Bureau of Economic AnalysisIndian stock markets also crashed due to a

slowdown in the US economy.Markets bounced back after the US Fed cutinterest rates


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Current crisis in theUS

Defaults on sub-prime mortgages have led to amajor crisis in the US.Sub-prime is a risky debt offered to people with

poor credit or unstable incomes.Major Banks landed in trouble after people

could not pay back loans.Housing market soared on the back of easyavailability of loans


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Current crisis in the US

Realty sector boomed but could not sustain themomentum for long and collapsed due to loandefaults.Foreclosures spread like wildfire putting the USeconomy on shaky ground.coupled with rising oil prices at $100 a barrel,

slowed down the growth of the economy.


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Impact of an AmericanRecession on India

Indian companies have major outsourcing deals fromthe US.

India economy is likely to lose between 1-2 percentage points in GDP growth in the next fiscalyear.Worries for exporters will grow as rupee strengthensfurther against the dollar.


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Impact of an AmericanRecession on IndiaExperts note that the long-term prospects for India are stablewhole of Asia would be hit by a recession as it

depends on the US economyIn the globalised world, complete decoupling isimpossibleIndia may remain relatively less affected byadverse global events.


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Impact of an AmericanRecession on India

Many small and medium companies have alreadystarted developing trade ties with China andEuropean countries to ward off big losses.IT and IT-enabled services, textiles, jewellery,handicrafts and leather segments will suffer losses because of their trade link.


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Impact of an GlobalRecession on India

IT sector will be the worst hit as 75 per centof its revenues come from the US.If the service sector takes a serious hit, Indiamay have to revise its GDP to about 8 to 8.5

per cent or even less.


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The following graph shows the changingtrend over the Years in all the major sectorswhich contributes the overall developmentof the Indian Economy


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0

5

10

15

20

25

30

I n f r a

s t r u c

t B F S

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T e l e c o F M C P h

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200720082009Proj


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Global recession has made Indian companiesto give lay offs. The following graph showsLayoffs in the Total Workforce of Major ITCompanies across various verticals at

different locations


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Layoff

0100200300400500

600700800900

I B M M i c

r o s o f t T C S S a p i e n t P a t n i

W i p r o

Layoff


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Mental MeltdownShrinking jobs and Pay cuts owing to recessionhave taken heavy toll on mental health of Indiashigh-profile work force

Dr. Jitendra Nagpal, physiatrist says the majorityof those people are 25-30 age groupsymptoms are loss of appetite, irritability, longspells of silence, lack of communication withfamily and friends and absenteeism


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Mental MeltdownAlthough no empirical data are available on howmany people affected from recession andsuffering from work-related stress.

But increase in number of cases is a matter of concern for both organizations and families. Nagpal says this is due to unable to face realitiesof failure, which develops a fear for work, he

believes this is mainly due to the lay off and fear of losing the job.


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Hard challenges IT-BPO services

Confidence levels appear to be at an alltime low in IT industry2001-03 slowdowns in the US economy sawthe world embrace the off shoring of IT andBPO services like never before.Current recession threatens to reverse much

of that, with protectionism gaining ground inthe US.


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Hard challenges IT-BPO services

Level Wise Average Salary Increase over the period of years in Indian IT companiesand the projection now in the year 2009


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Hard challenges IT-BPOservices

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T o p E x e

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n a g e r /

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20072008

2009 Proj


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Out of AmericaOld bugbear, protectionist legislation, has come

back to haunt the industry Now $52 billion Indian IT services juggernaut is

worried.US Senate voted to restrict the hiring of foreignworkers (H-1B visa holders) by banks that are

receiving government bailouts under theTroubled Assets Relief Program (TARP).


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Out of America

The recession has forced the US to become protectionist"Most Fortune 100 companies have a large

portion of their business outside the US.This will restrict them to do most of thecompany to outsource and this will create lot

of job opportunities for Americans.


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Bad protectionProtectionism will be bad for both the US andIndiaThe Smoot-Hawley Tariff Act of 1930 is an

example of how a recession deepen to adepression.Economists now believe that the GreatDepression was deepened as a result of thislegislation.Again a similar situation could arise now.


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Counter strategyThere is already a shift in business strategies of corporate IndiaLarge IT and BPO firms have started looking at

other markets like Europe, and even the domesticmarket.Indian companies will have to adopt a multi-

pronged strategyIn case of a full US recession, the onsite staffing

business will see a decline in sales and profit.


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Counter strategyRecessions at this juncture may not last for morethan two to three yearsSmart companies will continue investments to

take advantage when recession ends.India will have to spend a lot more to developmarket and supply chain links in alternate

markets like Asia and Europe.Experts say the export dependent sectors need tore-focus on local demand and income from non-dollar economies.


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Can India be a marketoption?

IT firms can definitely find a market in IndiaIndia has a huge, small and medium enterprise

base and it is the right time to tap this segment.

As for automotive components, consumer electronics and mobile devices, they have alreadyfound a market in India

They have also started looking at tie-ups in Chinaand other BRIC countries .

onseq ences o o


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onsequences o o arecession on India job

marketWorst affected because of Global recession will be service industry of IndiaService industry contributes about 52% to India's

GDP growth.People may say that there is going to be a huge

job loss due to recession

There is no threat to the skilled people NASSCOM said India will have a shortage of about 5 million skilled people in IT/ITeS

Consequences of Global


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Consequences of Globalrecession on India job

marketIndia's travel, tourism and power industry isgoing to grow at a better rate.India has a huge population so a hugeconsumer base so we dont have to alwaysdepend on US for our growthIndia's GDP is expected to grow at the rate

of 8.5-8.9 % which is again way above thegrowth rate of US

Consequences of Global


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Consequences of Globalrecession on India job

marketIts time to be innovative and more effective toincrease the over all efficiency and go for systematiccost cutting to balance the rupee effect.

In West Africa goods at departmental stores are soldat the rate 5 times than Indian price and Indiangoods

Its an excellent opportunity for our exporters.


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ConclusionThe overall impact of a Global slowdown onIndia would be minimalUnlike the rest of Asia, India is a strong domestic

demand storySo any slowing in the US is likely to have a moremuted impact on India.

Strong growth in domestic consumption andsignificant spending on infrastructure are the two pillars of Indias growth story


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Conclusion

Corporate India is also learning to master theart of efficient capital management anddelivery of value-added services to sustain

profit margins.Interest rates are expected to be stable

primarily due to control over inflation and

proactive measures undertaken by the RBI.


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Conclusion

The electoral mandate may force a coursecorrection.The intervening period of more than threemonths can be one in which the economyand mass livelihoods suffer damage that cantake too long to repair.


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Conclusion

HOPING THIS TIME RECESSIONVANISHES SOON SO THAT INDIAGETS BACK TO ITS STRONGER GDP

GROWTH RATE OF 8% TO 10%(THOUGH THE EXPERSTS SAY ITWILL LAST TILL Q3 OF 2009)


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global recession in india

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