World economic recession and its impact on india

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INTRODUCTION

1. The world economy went into a steep recession in the last three months of 2008 with global real GDP dropping at a 6 percent annual rate[2]. This was clearly the worst decline in world output and also in world industrial production and world trade of the post World War II era, with virtually all countries getting affected by the downturn and many registering record declines in GDP.

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Many economists and experts foresee a global recession lasting well into 2010. However almost all believe that whatever may be the duration of the recession, the recovery is going to be slow.

2. The global financial crisis is unique in its kind. What started off as a sub-prime crisis in the US housing mortgage sector had turned subsequently into a global banking crisis and then into a global economic crisis. Housing is commonly cited as a fixed asset. It is ironic that this ‘fixed asset’ is the one that has triggered the greatest economic crisis since the ‘Great Depression’ of 1930s.

3. The recession in the US financial markets and the global meltdown had affected complete world with a varying levels of recessional impact. World over the impact was diversified and its impact was observed from the very fact of falling Stock market, recession in jobs availability and companies following downsizing in the existing available staff and cutting down of the perks and salary corrections. In this globalised business scenario, the impact of recession at one country filters down to all the linked industries and this has been very aptly proven by the current market situation which is faced by the entire world.

4. According to the IMF’s World Economic Outlook, published on 08 Oct 08, the world economy was “entering a major downturn” in the face of “the most dangerous shock” to rich-country financial markets. The IMF expected global growth, measured on the basis of purchasing-power parity (PPP), to come down to 3% in 2009, the slowest pace since 2002 and on the verge of what it considered being a global recession. (The IMF’s definition of global recession takes many factors into account, including the rate of population growth.). The severity and suddenness of the crisis can be judged from the IMF’s forecast for the global economy. For the first time in 60 years, the IMF is now forecasting a global recession with negative growth for world GDP in 2009-10. The IMF has revised its forecasts downwards thrice since July 2008, and it is not yet certain that this will be the last revision.

5. The Indian economy looked to be relatively insulated from the global financial crisis that started in August 2007 when the ‘sub-prime mortgage’ crisis first surfaced in the US.

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