Recession-The Biggest Giant

       A recession is a decline in a country’s gross domestic product (GDP) growth.A recession is a slowdown in economic activity.Production, as measured by gross domestic product (GDP), employment, investment spending,household incomes, business profits, and inflation all fall, while bankruptcies & unemployment rate rise.

 Factors that push an economy into it-

1.     Credit crunch - shortage of finance

2.     Falling house prices - related to shortage of mortgages and credit crunch

3.     Squeezing incomes and reducing disposable income

4.  Collapse in confidence of finance sector causing lower confidence amongst 'real economy'

                        Recession brings with itself all major consequences which create mayhem within the economy. One of the major effects of recession is Inflation. Recession comes into effect with inflation while on the other hand; it is one of the after effects of recession. This means the commodities reach their ever highest prices and people generally cut down on costs. Hence, inflation becomes the major effect left out by recession. Lower income is another effect of recession in the economy. As people cut down on costs, they tend to buy less which reduces the income and thereby fewer profits or no profits. The next consequence is the increment in mortgage rates. Lenders increase the mortgage rates in a bid to cover the losses they bear during that time. Employment opportunities are also one of the main targets when the economy is burning under recession. In order to cut down on costs, companies cut down on employment opportunities thereby leading with unemployment in the economy. So when an economy enters into recession, firms experience a decline in profitability.

Response To The Crisis

-Fiscal response

-Monetary Response

-Interest Rate Management

How it has affected India?

                          In the era of globalization, no one can remains isolated from the slowdown  of world economy. Heavy losses suffered by major International Banks is going to affect all nations of the world as these financial institutes have their investment interest in almost all countries.

India is facing heat on three grounds:

 (1)Our Share Markets are falling everyday,

 (2) Rupee is weakening against dollars and

 (3) Our banks are facing severe crash crunch resulting in shortage of liquidity in the market.