What is economic recession and why does it harm the common man? Know when such economic crisis came in India
If there is a recession in America, it will affect all the countries of the world.
The main reason for economic recession is the stoppage of money flow or investment.
There was economic recession in India in 1958, 1966, 1973 and 1980.
New Delhi. Due to rising inflation and continuous increase in interest rates, the risk of economic recession is deepening in America and European countries. Many economists said that Europe is going into recession. At the same time, there may be a recession in America by next year. If there is a recession in America, it will affect all the countries of the world.
Due to recession, there is a risk of rising inflation and unemployment. The income of the people decreases and due to the impact of the economy, there is a continuous decline in the stock market. Let us know what is economic recession and how it harms the economy of a country.
How does economic recession come?
When GDP growth in a country’s economy declines for two consecutive quarters, it is technically called a recession. In other words, if the pace of the economy starts falling instead of increasing and if this trend continues for several quarters, then the situation of economic slowdown starts in the country.
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Things get worse due to recession
In an economic downturn, people are short of money and they try to reduce their needs. The result of this is that the demand in the market starts decreasing and the sales of the products are less. In such a situation, it is natural that when the demand is low, the production will also be affected, so the company would like to keep the employees according to its profit, due to which the retrenchment of employees starts, due to which lakhs of people become unemployed.
At the same time, the main reason for the economic slowdown is the stoppage of money flow or investment. Because the purchasing power of the people decreases, as well as the investment coming from the country and abroad also decreases. The prices of crude oil increase in the international market, due to which the inflation rate increases and people are unable to buy the things they need. The depreciating value of rupee against dollar is also the main reason for this. During a recession, a fall in exports relative to imports would increase the country’s fiscal deficit and lead to a reduction in foreign exchange reserves.
Also read- The world is heading towards recession, interest rates will continue to rise till inflation does not come down – economists estimate in the survey
India will not be affected by the current recession
However, even at present, speculation about the recession has continued. But it is less likely to have a direct effect on India. It is believed that the global economy like America, Europe and China will go into recession. Many economists and industrialists have expressed the possibility of economic recession in the world till next year.
When did the economic slowdown happen in India?
India has seen a total of four recessions since independence. RBI’s GDP growth figures confirm this. It came in the years 1958, 1966, 1973 and 1980.
- In 1957-58, the growth rate of India’s GDP went to minus. This year the GDP growth rate was recorded at -1.2 percent. The main reason for this was the huge increase in the import bills.
- Due to severe drought and famine in the financial year 1965-66, India’s GDP growth again went into minus.
- The situation of 1973 recession was created due to the oil crisis. The Organization of the Petroleum Producing Arab Countries (OAPEC) banned the export of oil to all countries that sided with Israel in the Yom Kippur War. Due to this, the prices of oil had increased up to 400% for some time.
- Due to the Iranian Revolution in 1980, there was a big blow to oil production all over the world and due to this, there was a recession in India this year. During this also, the prices of oil imports increased wildly.
Apart from this, India faced economic crisis in 1991, 2008 and 2020 as well.
During this, India’s economy had collapsed badly.
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Tags: business news, Indian economy, inflation, Recession
FIRST PUBLISHED : November 12, 2022, 10:52 IST