effect of recession ppt

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AFFECT OF RECESSION ON INDIAN BUSINESS BY: Sec ‘Q’ (PGDIB) Rashmi Verma

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ppt on the effect of recession in India.

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Page 1: Effect of recession ppt

Rashmi Verma

AFFECT OF RECESSION ON INDIAN BUSINESS

BY: Sec ‘Q’ (PGDIB)

Page 2: Effect of recession ppt

Rashmi Verma

RECESSION- MEANING

• A RECESSION is a decline in a country's gross domestic product (GDP) growth for two or more consecutive quarters of a year.

• A RECESSION is also preceded by several quarters of slowing down.

• RECESSION is the result of reduction in the demand of products in the global market.

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Rashmi Verma

National Bureau of Economic Research (NBER)

• National Bureau of Economic Research (NBER) is the official agency in charge of declaring that the economy is in a state of recession.

• They define recession as : “significant decline in economic activity lasting more than a few months, which is normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales”

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Rashmi Verma

Business Cycle

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Rashmi Verma

DIFFERENCE BETWEEN RECESSION AND DEPRESSION

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Rashmi Verma

CAUSES OF RECESSION

• Currency crisis• Energy crisis• War• Under consumption• Overproduction• Financial crisis• Price of Fuels

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Rashmi Verma

EFFECTS OF RECESSION

• Bankruptcies• Credit crunches• Deflation (or disinflation)• Foreclosures• Unemployment

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Rashmi Verma

GLOBAL RECESSION

• It is rightly said that, “when US sneezes the world catches the cold”

• Economists at the International Monetary Fund (IMF) state that a global recession would take a slowdown in global growth to three percent or less.

• The IMF estimates that global recessions seem to occur over a cycle lasting between 8 and 10 years.

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Rashmi Verma

World Recession

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Recession Name

Recession Year Time Taken Cause & Impact

Great Depression

1929-1939 10 years Stock markets crashed worldwide, and a banking collapse took place in the United states. This sparked a global downturn, including a second, more minor recession in the United states, the Recession of 1937.

1937 Oil Recession

1973-1975 2 years A quadrupling of oil prices by OPEC coupled with high Government spending due to the Vietnam war lead to stagflation in the United States.

Early 1980’s Recession

1980-1982 2 Years The Indian Revolution sharply increased the price of oil around the world in 1979, causing the 1979 energy crisis.

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Recession Name Recession Year Time Taken Cause & Impact

Early 1990’s Recession

1990-1991 1 year Industrial production and Manufacturing trade sales decreased in early 1991.

Early 2000’s Recession

2001-2003 2 years The collapse of the dot-com bubble, the September 11 attacks and accounting.

Early 2008’s Recession

2008-so on continuing The collapse of US economy and other related countriec.

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Rashmi Verma

Recession in India

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Rashmi Verma

Causes of Recession in India

• Indian companies have major outsourcing deals from the US

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Rashmi Verma

Affects of recession on Indian business

• The sectors least affected (directly) by the slowdown are Pharmaceuticals, Oil & Gas, FMCG, Media & Entertainment

• Those which will feel a moderate impact of the global crises are Power, Automobiles, Retail, Hospitality and Tourism

• The sectors most severely affected are Banks, Financial Services, Real Estate, Infrastructure and Information Technology

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Rashmi Verma

Major sectors affected by Recession

• Indian Stock Market• IT and BPO• Banking• Real State• Aviation• Textile• Automobile• Hospitality

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Rashmi Verma

TEXTILE

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Rashmi Verma

Textile

• 'cottage industry' to the ‘state of supremacy’• second largest employer in India, next to

agriculture• generates employment opportunities for

approximately 33.17 million workers directly, and 54.85 million workers indirectly

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Rashmi Verma

• 60% of the total garments manufactured in India are exported to foreign markets like EU, US, and Japan, generating revenue of upto US$ 52 billion

• Economic slowdown in the US and EU has affected the textile business in India, resulting in a drastic decline in the country's garment exports

• almost 8, 00,000 garment and textile employees had lost their jobs

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Rashmi Verma

• October 2008:Othe total output of the textile sector came down by 10%

• Punjab generating employment for 4,00,000 jobs has suffered a 50% loss in sales

• Majority of the layoffs target the daily-wagers

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Rashmi Verma

• Dr P R Roy, President, The Textile Association of India (TAI), while discussing the reasons for slump in Industrial production, told Fibre2fashion, “Slowdown in global economy is definitely affecting our textile industry. But, there is a lot of pessimism in the market regarding global recession, which instigates negative thinking among people. So without plotting their own position, the manufacturers have started cost cutting. This can be one of the many reasons for plunging industrial production.”

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Rashmi Verma

INDIAN BANKING SECTOR

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BANKING

• banks are like backbone for industries• They provide loans and capital to the business,

industry, agriculture etc. • Loss of profit and Capital of these banks bring

serious threat to the economic development of that country

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• The present world recession has its roots in sub- prime crises

• The global banks and brokerages have had to write off estimated $ 512 billion in sub-prime

losses

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Rashmi Verma

• the banking system in India had no direct exposure to the subprime assets that triggered the crisis in the advanced economies

• the Reserve Bank had taken a number of measures which contributed to strengthening the resilience in the Indian banking system

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Rashmi Verma

• Banks have suffered losses, including some public sector banks like Punjab National Bank, Bank of India, State Bank of India and Bank of Baroda as they had an exposure to the instruments issued by Lehman and Merrill Lynch.

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Rashmi Verma

Reason for non failure of Indian banking system during recession

• Traditional working of Indian Banks• Strong base of nationalized bank• Effective control of RBI• Role of Finance Ministry

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Rashmi Verma

INDIAN AVIATION INDUSTRY

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Indian Aviation Industry

• The First Phase – the Pioneering Years• The Second Phase – Public Sector Era• The third Phase – the Liberalization Era• The Fourth Phase – The Era of Growth and . .• Recession (Fare Setting, Fare War and their

Consequences)

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Aviation before recession

• India aviation industry was expanding• There were new budget airlines and private

players• The number of job opportunities in the

industry was going up• Students started signing up for courses like

airline pilot's, flight attendant's, ground crew etc.

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Rashmi Verma

Challenges after Recession

• High Aviation Turbine Fuel (ATF) prices• Rising labor costs• Shortage of skilled labor• Excess capacity• Huge debt burden• Intense price competition• Job losses

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Indian Stock Market

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• Biggest falls in Indian stock market history• Worst hit stock

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Economic Growth in Advance nation had close to zero

We take you through the BIGGEST falls in the Indian stock market history.

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Rashmi Verma

January 21, 2008January 22, 2008February 11, 2008March 3, 2008March 17, 200810 October 2008October 24, 2008

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Rashmi Verma

Bloodbath in Indian Stock Markets

• Investors in Indian markets lost more than 16 trillion Rupees in just 2 days !

• The ICUs of almost all city hospitals were fullo The first lesson o The other big lessono other learning which I hope will play out in the

future

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Rashmi Verma

AUTOMOBILE INDUSTRY

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Indian Automobile Industries

• India is the world's largest two wheeler manufacturer.

• India is the world's second largest tractor manufacturer.

• India has the fourth largest car market in Asia.• India has the world's largest three wheeler

market.• India is fourth largest Automobile exporter in

the world.

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Rashmi Verma

Effect On Automobile Company

• TATA MOTORS

• MARUTI SUZUKI

• MAHINDRA & MAHINDRA

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Rashmi Verma

Effect Of Recession

• Uncertain exchange rate and a sudden increase in dollar value against Indian Rupee

• Delayed Payments from the OEMs (Original Equipment Manufacturer)

• Alloy and steel prices have also not shown any reduction in their prices

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Rashmi Verma

Post Recession

• The Indian automobile industry is expected to grow to US$ 40 billion by 2015 from the current level of US$ 7 billion in 2008.

• Challenge of Chinese Automobile Industry.

• Market Strength of Indian Automobile Industry.

• New Innovation

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Rashmi Verma

Contribution towards the Economy

Contribution to GDP of about 7%Second largest employment generator in the

countryReal estate growth gives boost to steel and

cement sectorsReal estate is a growth engine for

development of over 269 allied industries

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Rashmi Verma

Causes Of Recession On Real Estate

• Uniformity of land laws, slowdown and approval delays, the developers missed to complete their projects within the boom period.

• Withdrawing of money from Real Estate sector.

• Many companies has given pink slips to their employees

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Major Player In Real Estate

DLF

UNITECH GROUP

ANSALS

PARSAVNATH DEVLOPERS

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Rashmi Verma

Impact on Real Estate Sector

• Increase in prices of inputs due to inflation effecting all areas of economy like cement, steel, etc.

• Increase in home loan interest rates resulting into additional EMI burden on the borrowers.

• Reduction in salaries and layoffs resulting into reduced demand for Real estate• Demand-supply imbalance• Forced correction in prices• Reduction in Commercial Rentals• Projects’ stagnancy• Slow down in infrastructure projects• Difficulties to raise fund (Failure of Emaar IPO)• Loss of Jobs• Shortage of skill workers

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Effect on Finance

• DLF – 79 % decline in profits & 57 % slide in sales• Unitech 63 % decline in profits & 50 % slide in

sales.• Parsavanath, India bulls, HDIL, Akruti, Shobha,

Purvankara have reported decline in profits upto 95 %.

• Overall 76 % dip in profits & 57 % fall in sales in First Quarter of FY 09-10 over First Quarter of FY 08-09.

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Rashmi Verma

FUTURE PREDICTIONS

Close to $7 billion to $8 billion of venture capital expected to flow into Indian real estate market.

A significant increase in project execution through Public- Private-Partnerships.

More demand for office and industrial space.

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Rashmi Verma

INDIAN BPO AND IT INDUSTRY

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BPO CONTRIBUTION IN INDIA

• India has revenues of 10.9 billion USD• 30 billion USD from IT and total BPO• 5-6% share of the total BPO Industry• Employs more than 700,000 people • 35 percent of the BPO market worldwide.• Eastern Europe, Philippines, Morocco, Egypt and

South Africa have emerged to take a share of the market

• market share of the offshore piece• is expected to decline.

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Impact on BPO Industry

• Indian IT and BPO companies to reduce their dependency to US

• start marketing their services to other countries like APAC

• Tier II IT and BPO companies wil merge with larger IT and BPO companies

• Indian outsource vendors will reduce hiring new employees

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What it means to India

• Cost efficiencies and business transformation in companies will likely gain greater precedence than ever

• The resilient vendors can build new and differentiated offerings for companies

• India may benefit due to higher experience and maturity in these areas.

• Cash-starved companies may look to monetise their investments in captive operations

• HR outsourcing will provide remediation to some of the staff post

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“Global Sourcing in Banking, Capital Markets and Insurance.”

• The largest untapped opportunities in banking are specialization in transaction processing, account servicing and credit card fraud management

• Well-served functions in the capital markets sector that will continue to drive growth include business acquisitions, account servicing, investment operations, registrar and transfer functions and fund Accounting

• The largest untapped opportunities in the insurance sector include policy servicing, customer service, finance and accounting, new business acquisition and claims processing

• Most financial services companies are now sourcing BPO through captive units in India and the Philippines, however, third-party sourcing also is rising

• Financial services buyers are constantly innovating and restructuring delivery models, the latest being a hybrid model where the back-end processes are migrated to third-party suppliers while complex, judgment-intensive functions are retained within the captive

• To date, UK insurers are largest adopters of offshore BPO, suggesting significant growth opportunities exist for the U.S. insurance market that is three times the size of the UK market.

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CONCLUSION OF THE STUDY OF RECESSION & BPO

• Existing contracts will continue• Growth in the hard-hit will be limited

sectors (especially BFSI).• Sectors, not seeing much slowdown • competition for the few available outsourcing

contracts will be strong.

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Impact on the IndianIT industry

• Asia / Pacific is experiencing a deferred impact due to the “domino effect” of the current crisis.

• 43% of Western companies are cutting back their IT spend and nearly 30% are scrutinizing IT projects for better returns.

• The slowing U.S. economy has seen 70% of firms negotiating lower rates with suppliers and nearly 60% cutting back on contractors.

• The IT services and outsourcing market is currently undergoing a structural transformation that will have a profound effect on how IT service providers will have to conduct their business

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CONCLUSION OF IT SECTOR AND RECESSION

• Some opportunities for managing the bottom line

• The macroeconomic environment is depressing

• The environment looks weakest in a long while,and yet there remain pockets of opportunity.

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Hospitality Industry

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Overview

Recession took its toll on hospitality industry.

Effect on travelers.

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State of Indian hospitality industry

Foreign exchange losses.

The biggest drop.

Things changed during recession.

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Facts and Figures

The bottom line was severely hit by 65%.

Rise and fall due to recession.

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Recovery Cycle

Increased supply of rooms.

Rise in the NCR region.

Road to recovery.