GLOBAL RECESSION

Global recession is said to represent a period of economic slowdown at an economic growth of 3% or less. The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s. The depression originated in the United States, starting with the stock market crash of October 29, 1929 (known as Black Tuesday), but quickly spread to almost every country in the world. Followed by consumers, many of whom had suffered severe losses in the stock market the previous year, cut back their expenditures by ten percent, and a severe drought ravaged the agricultural heartland of the USA beginning in the summer of 1930.

The global recession of 2007-2009 has been said to be the next worst thing to strike the world after the Great Depression. However, seeing the current scenario, it seems that things aren't going to turn worse. Most countries as U.S. have recorded a 'U' shaped recovery curve with a recovery:loss ratio of almost 1. Some unlucky nations as U.K. & Japan have had an 'L' shaped recovery curve, while riding high n stringent regulations, timely curbing of credit & inflation & a conservative economy, China & Brazil & some other Latin American countries have recorded a V shaped recovery curve. Even India can said to experience a 'V' recovery. 

With regards to what went wrong, a lot of explanations have been given; the origin being undisputed, America. The Chairman of Fed Reserve, Alan Greenspan has been accused of being instrumental to deregulating the financial system in America, post the dot-com bubble burst & lowering the interest rate barriers. The leniency caused rise of a credit driven market which spurted a false economic boom. Alas, as some have observes, Greenspan just delayed the outcome of the dot com bubble burst. Yet another group of analyst point their  finger at The Clinton Government who had reportedly put the Freddie & Fannie institutions under considerable pressure to loosen their policies. Fannie Mae, America's largest underwriting institution for mortgage loans was asked to extend credits to low & medium income families, thus, leading to a gradual slip of the situation beyond control to lead to what we know today as sub prime crises. The rising inflation of commodity prices, post a stagnation in 1999-2001, shook consumer sentiments considerable. The highlight point being Oil prices rise to above $150 a barrel. America riding on high debt with their sub prime mortgages traded across the world & over dependence of some countries on exports to the leading nation of the world saw major countries across the world catch a cold as America sneezed.

The savings rate in India is around 35% and the demand is consumer driven not state driven unlike China. RBI rules are strict and banks have shown great amount of prudence, The banks are not state controlled, on the contrary they do not always heed RBI’s recommendations. I am certain that with political stability, reforms will come in steps & not in one large step – prudence is the answer. However, problems  from the short-term issue of droughts to the longer-term issue of dependence on foreign oil and fiscal deficits to the omnipresent political inefficiencies