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Monday, April 16, 2012

What, How, Why --- Recession

Define Recession--

 A country’s ‘Gross Domestic Product’ (GDP) substantially dwindling for two or more quarters in succession during a Financial Year preceded by numerous slackened quarters define Recession.

A View---

It is true to the adage, “the world shivers; whenever, it snows in the US”. This is clearly discernible the way markets around the world plummeted and global economy impeded from apparent recession in the US.

The enervating American economy is bad news for everyone including India.

Symptoms of Recession---

Any economy usually upsurges for a period of 6-10years, then trudges to grow and reaches saturation in economic life cycle. After the saturation, 6- 24 months is down sliding period that precipitates to recession.

Recession smacks, when the consumer becomes parsimonious and wary to spend due to lack of confidence in the growth of economy. This triggers less demand for goods/services; it proportionally reduces the production, scales lay-offs, and exponentially raises unemployment. Ultimately the investors and stakeholders fear about stock values and shell out less. The stock markets dilapidate as pack of cards.

Always the economy and stock market are linked. The trend of economy correlates with the efficacy of stock markets. The Indian market has also tumbled as US economy has decelerated.

Recession-- Impact of the US---
Many Indian companies have outsourcing deals with companies in US.
The exports have also been bountiful. According to the statistics, the Indian economy might wither for the companies that have dealings in US. Exporters’ worries will augment further once the dollar wanes against the rupee, so frail dollar would sanguinely accrue more foreign money to Indian markets. Recession could deflate oil prices to nearly 3/4ths of the present value and will slim down inflation.
The US economy comprises 30% of the total GDP globally. The only silver lining in this cloud is that this will take at least 6 months; at a scampering pace.
 In the second part-- I will be engaging on the consequences! 

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