A friend of mine asked me to write something on recession; although I am not an authority on it but then this is just a blog so I will write.
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On using Google and reading many different sites, if one has to explain what is recession then it would be this -
"A true economic recession can only be confirmed or announced if GDP (Gross Domestic Product) growth is negative for a period of two more consecutive quarters."
What are the causes for recession? When did it start? What was the exact point is difficult to ascertain. According to one website, ‘the true starting point actually rest in the several quarters of positive but slowing growth before the recession cycle really begins. Often in a mild recession the first quarter of negative growth is followed by slight positive growth, then negative growth returns and the recession trend continues.' (recession.org)
Although the truth is there is no pattern, look at the graph given on the right. Or if the above statement is right, in that scenario the worst is not over.
Also though the two quarter theory is generally accepted but most experts do not agree on it.
Just for information, so that there is no misunderstanding. In the US it's the National Bureau of Economic Research (NBER), which announces if the country is in recession. And they use a multitude of factors before announcing that the country is in recession like unemployment, industrial output etc.
Now in India's case there is no defined authority, at least not to my knowledge.
If you are to ask me then I would say, probably RBI will announce, if there is ever such a situation. Then stock markets will crash, therefore, the Finance Minister would cry foul. So, the governor of RBI will file a case and the law ministry will give its own interpretation. I think after the first announcement and the denial it will be another quarter when the Supreme Court will give the verdict, "WE ARE IN RECESSION".
Now no need to panic that was just a scenario "if" there is a recession in India.
India is not in recession. Our growth has just slowed down and from IMF to the individual experts are all saying that India will see growth although a small one which can range from 2 percent to 5 per cent for the calender year 2009. Although I personally would put it between 1.5 per cent to 4 per cent at best. If it goes more than 4 we should celebrate, that we managed more than 4 when the world shrank .5 percent or more.
Also though the two quarter theory is generally accepted but most experts do not agree on it.
Just for information, so that there is no misunderstanding. In the US it's the National Bureau of Economic Research (NBER), which announces if the country is in recession. And they use a multitude of factors before announcing that the country is in recession like unemployment, industrial output etc.
Now in India's case there is no defined authority, at least not to my knowledge.
If you are to ask me then I would say, probably RBI will announce, if there is ever such a situation. Then stock markets will crash, therefore, the Finance Minister would cry foul. So, the governor of RBI will file a case and the law ministry will give its own interpretation. I think after the first announcement and the denial it will be another quarter when the Supreme Court will give the verdict, "WE ARE IN RECESSION".
Now no need to panic that was just a scenario "if" there is a recession in India.
India is not in recession. Our growth has just slowed down and from IMF to the individual experts are all saying that India will see growth although a small one which can range from 2 percent to 5 per cent for the calender year 2009. Although I personally would put it between 1.5 per cent to 4 per cent at best. If it goes more than 4 we should celebrate, that we managed more than 4 when the world shrank .5 percent or more.
