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WHAT IS RECESSION?

Recession

A recession is when the GDP growth rate of a country is negative for two consecutive quarters or more. But a recession can be gauged even before the quarterly gross domestic product reports are out based on key economic indicators like manufacturing data, decline in incomes, employment levels etc.,

Although an economy can show signs of weakening months before a recession begins, the process of determining whether a country is in a true recession (or not) often takes time. A recession is short, but its impact can be long-lasting.

Why do recession occur?

Understanding the sources of recessions has been one of the enduring areas of research in economics. There are a variety of reasons recessions occur. Some are associated with sharp changes in the prices, which lead to steep drop in spending by both the private and public sectors.

Some recessions, like the 2008 global financial meltdown, are rooted in financial market problems. Sharp increases in asset prices and a rapid expansion of credit often coincide with accumulation of debt. As corporations and households get over-extended and face difficulties in meeting their debt obligations, they reduce investment and consumption, which in turn leads to a decrease in economic activity. Not all such credit booms end up in recessions, but when they do, these recessions are often more costly than others. In some countries with strong export sectors, recessions can be the result of a decline in external demand. Adverse effects of recessions in large countries—such as Germany, Japan, and the United States—are rapidly felt by their regional trading partners, especially during globally synchronized recessions.

Some recessions are also a result of global shocks like the current coronavirus-triggered lockdowns, which shut down economic activity in many countries.

Impact of a recession

One of the consequences of recession is unemployment, which tends to increase, especially among the low-skilled workers, due to companies and even government agencies laying off staff as a way of curtailing expenses. Another result of recession is drop in output and business closures. Fall in output tends to last until weaker companies are driven out of the market, then output picks up again among the surviving firms. With more people out of work, and families increasingly unable to make ends meet, there will be demands for increased government-funded social schemes. With drop in government revenues during recession, it becomes difficult to meet the increased demands on the social sector.

The most popular, or most recommended, policy for any country to dig itself out of recession is expansionary fiscal policy, or fiscal stimulus. This can be usually a two-pronged approach – tax sops and increased government spending.

LATEST UPDATES ON RECESSION

Firms expect layoffs, cut down in expansions in 2023 amid recession fears
A survey of national economists found that more businesses now expect job reductions at their firms and to spend less on ...| January 23, 2023, Monday
Wall Street opens lower; US may be heading for a painful recession
Futures for the Dow Jones Industrial Average and the S&P 500 slid 0.8% before the opening bell| January 19, 2023, Thursday
Inflation eases slightly to 10.5% in Dec: UK national statistics office
The annual inflation rate for transport was 6.9 per cent in December, down for a sixth consecutive month, and the main driver ...| January 19, 2023, Thursday
Belying slowdown fears, Indian economy's animal spirits move to the right
Prices of finished products rose as firms passed on higher input costs and business expenses| January 19, 2023, Thursday
India's capex spending likely to slow on lower tax haul, global recession
Analysts say that as recessionary woes spread globally, India's tax collections and asset sales are likely to fall.| January 18, 2023, Wednesday
What are PM, FM hiding: Cong leader Jairam on Rane's 'recession' remark
What are Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman hiding from the country, Congress leader Jairam ...| January 17, 2023, Tuesday
US interest rate-cut expectations have yellow metal shining bright
Mild recession, low inflationary pressures in the US and a stronger rupee would act as headwinds| January 16, 2023, Monday
Recession likely this year; India may benefit from global trends: WEF
A third of respondents consider a global recession to be unlikely this year| January 16, 2023, Monday
Amid mass job cuts, Amazon HR staff turn from hiring to seeking jobs
Some Amazon.com Inc. employees are publicly posting that they are #OpenToWork on LinkedIn while still employed by the company| January 15, 2023, Sunday
A matter of governance: When independent directors call it quits midway
Most independent directors who quit do not explain why they are leaving before the end of their terms| January 12, 2023, Thursday

WHAT IS RECESSION?

Recession

Why do recession occur?

Impact of a recession

LATEST UPDATES ON RECESSION

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