RECESSION 2008

Most of the world’s stock markets in late 2007 and early2008 were touching sky. Even Indian

stock market made haywhile the sun shone on its horizon. Speculation was rife in manycorporate

headquarters that, this over exuberance and huge flowof money does not justify stock indices of

several countries.There were signals of herd mentality and greed looming allover. Those signals

finally came to life in early 2008. It startedwith IMF prediction of world growth falling to 4.0 percent

from4.9 percent. 4.0 was still a respectable prediction but thatannouncement was changed just after

two months.

USA is a dominant force in world economy and as per datait represents 21 percent of the world

economy. Changingeconomic statistics pointed towards a possible USA recessionand that signified a

global downtrend in economic cycle becauseof domineering impact of American economy. Many

countries,particularly developing ones are heavily dependent on USA anda hint of slowdown in

America spelled doom for them. Theaverage spending of American consumers reduced

significantlyand that resulted in reduced demand for imported items.

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Oil is extremely important for any country and 2008witnessed highest ever increase in oil

prices. Due to high oilprices, food prices also increased significantly. Crude oil pricesrose to $ 147

per barrel from $ 80 per barrel in a span of 6-7months. That fuelled global inflation to a dangerous

mark. 2008also witnessed unprecedented credit crisis across the worldwhich resulted in closure of

several established investment banks.

Things started getting worst with U.S. subprime-mortgagemarket. This induced a tremendous

housing market correction ofhuge implications for pushing up credit costs worldwide.Because of this

correction, a good number of Americans,European and Asian banks had to write down billions of

dollarsin holdings. In fact, few banks filed for bankruptcy and thatincludes name like Lehman

Brothers. It was biggest everbankruptcy case in US history. More than 81 companies havefiled for

bankruptcy in USA.

Unemployment rate also increased substantially in USAand many people had to leave job.

Another 1, 57, 000 jobs werelost in September 2008. Many developed and developingcountries are

struggling with low GDP and decreasing economicgrowth. Credit crunch has spread all over the

world. However,world over, policy makers are putting in extra liquidity and
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several other measures to stem the fall but nevertheless, we
seem to be going through economic recession.
RECESSION : INDIA'S PROSPECTS IN 2009

The global financial and economic crisis keeps gettingworse. A couple of weeks back the giant

Citibank had to bebailed out with several hundred billion dollars in cash andguarantees from the US

authorities.

Last week America reported November job losses of morethan 530,000, the biggest single

month figure since 1974, takingthe US unemployment rate to 6.7 percent, the highest in 15years.The

US, Eurozone, UK and Japan are now officially in

recession, in the sense of having experienced two successivequarters of negative growth. Several

analysts predict that therate of contraction of the US economy in this final quarter of2008 may be at

an astonishing annual rate of 4 to 5 percent.

Similar pessimism pervades the other two largesteconomies in the world: Europe and Japan.

There is enormousuncertainty about the depth and duration of the current globalrecession. But the

majority of expert opinion now concedes a

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