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RECESSION IN INDIAN ECONOMY


Is India facing recession? Is there another recession coming? 

What will happen if a recession comes? Is the economy of India going down? 

These are some of the questions that have been prevailing in all the debates going online, on television, or amongst a group of people all across the country. While, this is a no brainer as to why these questions are making headlines, we would have to believe the fact that all these on-going speculations are being made for some reason. 

But, the question that we all are looking answers for has still not been answered by any, which is, IS THERE REALLY A RECESSION IN INDIAN ECONOMY?

Let us find out answers to all those over headed questions as we read.

Before actually moving forward to find answers to these questions, let us first begin to know, WHAT IS A RECESSION?

The recession in the economy is basically a period when the economy goes into the downfall because of which the different sectors gets affected and during which the trade and industrial activities also tend to reduce. This recession is temporary and happens for a short period of time but its impact can be huge. Recession can generally be identified by the downfall in the Gross Domestic Product (or GDP) in two successive quarters. The period of economic recession is the period when the economic performance of the country goes on a downfall. A recession can be observed if the GDP is going on a downfall consistently for two to three months. That is the time after which you can predict if there is a recession coming or not. 

In simpler words, recession in the economy of the country is basically just a decline in the growth rate of the Gross Domestic Product (or GDP). If that is the case, then the speed at which the economy of the country is moving will get reduced. The Finance Minister, Nirmala Sitharaman, during the union budget of this year, had set a mark of the increase in the growth rate of GDP by 7 per cent and also aiming at $6 trillion economy in the coming five years. But, before any progress could happen, we heard a lot about India heading towards the recession in the economy right from that point. 

So, now let us move forward to check out on the performance and speculations made about the recession in the Indian economy.

RECESSION OR ECONOMIC SLOWDOWN?

A lot has been said and still going on about India facing recession, but is it really recession? As, it also could just be an economic slowdown. According to several reports, this can be said concluded that ‘it is not a recession, the economy of the country is growing, but at a slower pace.’ There is no uncertainty that India is as of now confronting economic slowdown. This fact can be demonstrated through various data charts and thorough analysis of the information. The growth rate of Gross Domestic Product (or GDP) was at 5 percent for the months of April to June quarter of 2019-20 making it as the lowest ever quarterly growth of Gross Domestic Product (or GDP) in the last six to seven years. Because of this consistent downfall in the growth rate of GDP has made it obvious for us to assume a recession or slowdown in the economy of the country. 

After going through several indicators of the economy and analyzing the data, it has been observed that the economy of the country has constricted abruptly over the previous two quarters. A portion of the markers or indicators have activated talks over an approaching downturn in the economy of the country. 

The following two months will be critical as it could choose the direction of the economic growth of the country.

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The absolute first day of trading after the Finance Minister Nirmala Sitharaman declared the mega merger of ten public sector banks into four, the stock market went sinking down on Tuesday, September 3rd. Sensex shed 600 points where Nifty lost more than 180 points. This is one of the numerous estimates taken to restore the economy of the country. The economic circle was brought to a crushing pause by demonetization in Nov 2016, and the retrieval was postponed by the disturbances brought about by the presentation of Goods and Services Tax (GST) in mid-2017.

IMPACT OF SLOWDOWN ON DIFFERENT SECTORS

The slowdown in the economy does not only affect the GDP of the country but also gets directly impacted on the different sectors that makes the economy of the country. It gets negatively impacted on various sectors. Recently, the government of India issued the index of eight core industries and the results have been strategically challenging.

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The impact of the slowdown of the economy falls on the various sectors like,

AUTO SECTOR

The automobile sector has been into the lowest growth ever. The sales in the automobile sector in the month of July has been the lowest since past 19 years which makes for a huge loss in the automobile sector as this sector is one of the most promising sectors.  There have been lakhs of people losing jobs on a regular basis and the truth is not hidden. 

TELECOM SECTOR

Ever since the arrival of Reliance Jio, the telecom sector has shaken down because of the free data plans that they have been offering. A lot of other service providers has taken a toll on this and now are making more and better beneficiaries for the customers. Due to this, telecom sector have gotten into huge debts and loans which have become hard for them to repay and hence, experiencing a downfall in the telecom sector.

REAL ESTATE & INFRASTRUCTURE SECTOR

Ever since the US prime loan crisis that happened in 2008, the real estate and infrastructure sector has been in the negative territory. It has been said that in excess of 12 lakh unsold units are lying with the industrialists which has made this real estate and infrastructure sector money shortfall. Along these lines, an increasing number of manufacturers are getting bankrupt and this will affect and have been affecting each part of the economy.

BANKING SECTOR

The sector that has suffered the most due to the slowdown in the economy of the country is the banking sector. In the event that this proceeds further in the same manner, their NPA will face increment and it will make twofold and more than ever issues for them. Their benefit is now under pressure and with such increment they will confront a crisis like never before.

Having said that, these are not all the sectors that gets affected by the slowdown in the economy, there are a lot of other sectors as well. But, these are the ones that have been most talked about.

WHAT HAPPENS DURING A RECESSION?

Impacts of Recession are a ton. Each and every one of them have directly shown the impact on the Financial Crisis. In this period, there has always been consistent economic growth but in a negative manner. You can see all the money related comparative thing to be self-destructive. The areas that gets affected the most because of these critical changes that happens during this period of recession are:

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1. UNEMPLOYMENT

During the Financial Crisis, the organizations produce very less, and consequently, they require exceptionally less workers. Nonetheless, a portion of the organizations even leave business during this period, making the laborers lose their positions. On the off chance that, if we consider 2007-2009 through into consideration, many individuals lost their positions who had a place with banking or account sector. At the same time when the interest for the Cars fell, the laborers were laid off.

                                                       ECONOMY ↓ GDP ↓ EMPLOYMENT ↓

2. SAVING RATIO INCREASES

During the Economic slowdown, the individuals become cautious and will in general set aside and save more cash as the market falls. In the event that individuals have a dread of losing their positions, at that point for the most part individuals would prefer not to spend or lose the cash they have and rather start setting aside more cash. 

On the off chance that we think about the past overviews, obviously during the Great Economic Contraction, there was a Paradox of Thrift as individuals will in general spare more and lessen utilization. This aggravates the Downturn even as it diminishes the utilization rate. Independently, everybody is making the best choice by keeping, however as everybody focuses on sparing, at that point on an all-out buyer spending diminishes.

3. FALLEN INTEREST RATES

In Stagnation, interest usually falls. This is all because inflation is lower and the Central Bank tries to stimulate the economy. Lower Interest rates, help the economy from striking the Stagnation. Lower Interest rates usually decrease the cost of borrowing and encourage investing and consumer spending.

4. FALLEN HOUSE PRICES

Ordinarily, the House Price falls before immobility strikes, and this is one of the basic reasons for Recession. During this time, joblessness builds, individuals would prefer not to put resources into lodging as they can't bear the cost of home loans, so home restraints become normal. This prompts an expansion in lodging accessibility and diminished interest for it. This is one of the essential purposes behind the 2009 Recession.

RECAP OF 2007-09

By July 2008, the world's biggest economy constricted forcefully because of a serious recession activated by the breakdown of a few over-utilized money related establishments. Waves of the "Great Recession" were felt by every single significant economy over the globe, bringing about unfavorable employment misfortunes. 

During the period between July 2008 and June 2009, significant economies endured a domino impact of the US downturn, after the nation's lodging business sector fallen. It was the most extreme financial emergency saw in the US since the Great Depression during the 1930s. 

The recessional impact on US during 2008-09 spread to in excess of 50 European and Asian nations. 

By 2008, it had taken out 8.7 million employments in the only us, not long after worldwide money related administrations firm Lehman Brothers, US's fourth-biggest speculation bank, failed. 

As indicated by a 2011 report by the FCIC (Financial Crisis Inquiry Commission), the key reason behind the downturn was the disappointment of the US government to direct the nation's money related industry. 

The US Federal Reserve's inability to control over the top home loan loaning was the prime explanation for the unexpected droop, noticed the report.

Last great recession was in 2007-09 which is the highest recession probability since August 2009. 

RECESSION 2020-2021: HOW TO SURVIVE?

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When the last global recession hit in 2008-09, India was well-cushioned to tackle the crisis. The next 2 months will be crucial as it could decide the trajectory of India’s economic growth. India has slipped to 7th position in global GDP ranking. GDP has fallen from 8% to 5% in the April-June quarter. India’s economy grew at its slowest pace in over six years in the June quarter following a sharp deceleration in consumer demand and investments. 

Notwithstanding, on the off chance that we consider US Presidential Elections, a portion of the advertisers state that it will lead the Presidential Inauguration. During this time the activity development will keep on being in energetic, with a decline in normal month to month increment, which is 185,000 of every 2019 and it will be 140,000 out of 2020. 

Then again, the private interest in 2020 will see a destruction to 1.3% from 2019 level. Every one of these circumstances legitimately show that yes there will be a downturn in 2020. 

Just 2% of the 226 respondents will see the US downturn this year, contrasted with 10% review that exhibited in February. There is the board part to talk about whether the following Recession will hit 2020 or 2021.

BOTTOM LINE

In the event that we take a glance at all the focuses above, we can infer that all the appropriate, reasons are demonstrating that the Recession can be a terrible one, for the most part for the Countries and organizations will be influenced by it. 

For all the activity holders, it is smarter to have confidence in their investment funds for a year. So regardless of whether there is a circumstance of jobless, at that point their sparing will be the greatest friends in need. 

Regardless of whether the Government of the various nations says that they are a great idea to proceed to confront the following Slump and there will cause no harm, be that as it may, we recommend that it is smarter to spare some Cash Reserve that is appropriate for in any event a year.

And, to conclude it once in all, we can say that, ‘India is not in recession, but slowdown.’

By Garima