GLOBAL ECONOMIC

MELTDOWN
“Repercussions, Challenges
and Reforms”

IMPACT ON TRADE,
INDUSTRY AND BANKING
SECTOR
The Economic Heat
 The large outsourcing company Wipro dismissed
2.5 percent of its work force in the second quarter.

 Interest rates jumped from 6% to 15% making

impossible for businesses and households to service
their bank borrowings

 “Liquidity crises" in the market.

 The Jordanian capital Amman is facing the brunt of

the meltdown and preparing for the worse.
It's a recession when your neighbor
loses his job; it's a depression when
you lose yours.
Harry S. Truman
The Global Economic Meltdown
 Economic recession is an
indicator of an economic
downturn
 A recession is a prolonged
period of time when a nation’s
economy is slowing down, or
contracting.
 This slow-down has to
continue for at least six
months to be considered a
recession.
The Business Cycle
Its Effects
 Includes high oil prices which led to drastic high food prices

 A substantial credit crisis leading to the drastic bankruptcy of large and well established
investment banks and commercial banks

 Increased unemployment

 Slump in personal income

 An unhealthy stock market

“Recession – The ultimate Financial

Checkpost”
IMPACT ON TRADE,
INDUSTRY
AND
BANKING SECTOR
Trade – The World Connector
 Trade is the willing exchange of
goods, services , or both

 The original form of trade was barter,

the direct exchange of goods and
services.

 Types - Bilateral and

Multilateral

 Various Innovations in Trade

Significance of Trade
 Trade promotes peace among nations
 It encourages exchange of ideas and encourages new inventions. For example,
China or any other country does not need to reinvent light bulbs.
 Increasing global trade encourages small countries to adopt the language of a larger
trading bloc

Factor price equalization
 Increase in GDP of a nation
 More Trade, Less poverty
 Promotes Industrial growth
Meltdown in Trade
 The Great Depression was a
major economic recession that ran
from 1929 to the late 1930s,
where a drop in trade and other
economic indicators.
 The nation's trade deficit fell in
December to a six-month low of
$6.25 billion
 The China-U.S trade gap was
$25.9 billion in October
 The trade deficits of recent years,
which peaked at 5.8% of GDP in
2006
The Indian Side-effects
 Decline in export growth to negative 9.9% is a
reflection of coupling of Indian exports with
global slowdown
 Recession Infects the Indian Textile Industry
since almost 50% of the total textile production
is being exported to US and EU.
 India's merchandise exports during October
were valued at $12.8 billion, 12 percent lower
 India 2007 Gold imports seen at record levels
(A positive impact)
 Oil imports during December 2007 were valued
at 5.96 billion dollars, u 23.78 per cent
from 4.81 billion dollars in 2006.
Industrial Sector: The Needs
Producer
 An industry is the manufacturing
of a good or service within a
category
 Secondary Sector, which is a type
of economic activity involved in
the manufacturing of raw
materials into goods and products.
Key Industrial Sectors
 Primary sector
 Secondary Sector
 Tertiary Sector
 Quaternary Sector
 Quinary Sector
Industrial Meltdown: An
Impact
 Recession trickles India’s Tech Industrial

Outsourcing Industry on the edge- Wipro dismissed 2.5 percent of its work force
 Chemical Industry on the Decline
 A pang in the Employment
Banking Sector: The Money
Circulator
 A banker or bank is a financial
institution whose primary activity is to act
as a payment agent for customers and to
borrow and lend money.
 conducting current accounts for his
customers
 paying cheques drawn on him, and
 collecting cheques for his customers.
The Money that Never Was

 You earn a salary of Rs.50,000

 Buy a house worth 20 Lac
 Assume that you will sell the
house at 40 Lac and make a 100%
profit
 Not able to pay monthly EMI of
Rs. 8,500
 Sell the house at a loss
 File for Bankruptcy

“Money is the Creator of

Profit and
Destroyer of the
same”
Weakening of the US Dollar
Modern Day Banking in Trouble
 Merrill Lynch and Citigroup – borrowed funds from Asia & Middle East to the
tune of $6.6 Billion and $14.5 Billion respectively to cover financial losses.
 The Great Fall of Lehman Brothers: Banks lead fallers in London's worst day in
years FTSE 100 index falls more than 5%
 Reserve Bank of India Raises Interest rates: Repurchase rate lifted to 8.5 percent
from 8 percent, and cash reserve ratio to 8.75 percent from 8.25 percent.
Global Economic
Slowdown: A Boon or A
Bane?
 Boon:
 India's provisional
gem and jewelry exports
increased by 22.27%
 Manufacturing production
is expected to increase 1.9
percent
 Servive sectors grow faster
during recession
 Bane:
 American International
Group (AIG) - $5 Billion
loss
 More than 200 troubled
banks are likely to be
purchased before they reach
the point of failure.
 A great hurdle for the IT
Industry
 Result of Crashing Oil
prices
First Hand Information
 Shasun Chemicals & Drugs Ltd,
Chennai:
 “The high commodity prices during
the 1st 10 months of calendar year
2008
did impact our margins
 focusing on cost management,
working capital improvements and
growing our research and formulation
business
 We also expect the RBI to bring
down the foreign currency volatility”
The Way Out of the Labyrinth- A
Solution
• Increased subsidies by the Government for
promotion of Exports
• Promotion of Increased Industries in
Service sector
• Constant check on devaluation of
Currency
• Don’t bite off more than you can chew
 Save at least 5% of the monthly income
 Wipe out credit debts
Conclusion

As a fall in the ditch would make us more cautious,

similarly the Global Economic Meltdown has made the World
Economy to arise, in spite of its drastic impact. The recovery of
the affected sectors – Trade, Industry and Banking has been
proved rapid and expected to ensure economic wealth.
By,
Vaishnavi.K
Bhavani.K
Sri Arabhi.G