Recession is a time of economic slowdown or in other words, declining economic output. The Global recession affects more countries and sometimes entire globe. A global recession is laid out by the international Monetary Fund. There are different time periods in history when the recession has hit the economy, and one among them is the great depression of 1930, financial crisis of US from 2007 to 2008 and the US subprime mortgage crisis of 2007 – 2009.
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The difficulty in Prediction
Forecasting the state of economy is as difficult as predicting something about stock market. Economists are good with reasons once an event took place, but at the prediction front, they are unsure. Economic indicators are very rarely show any warning before the actual recession arrives, and that is why economic downturns seem to come unexpectedly. Analysts strive hard to look for the clues.
It indicates that even when economy has performed the best according to indicators, it turns worse some times. Therefore, countries should be prepared for the next economic downturn.
Factors which may affect the state of economy
Factors which affect the economies of nations are policy interventions, politics, tax, ideologies, and the spending habits of governments etc. These all are wider concepts and every dimension and expect of it can not be traced until an event happens.
The Time Period of Recession
Recession begins from the one place and moves around the globe. Therefore, not all countries get the recession at the same time. People get impacted at different times. Some Countries may recover sooner from recession while other may take long.
What really happens during the recession?
Recession denotes a period of lessor economic activities. That means there are lesser jobs, and higher unemployment, lesser sales of the product and lesser opportunities of trade. It dips the business cycles and overall reduces the GDP.
The Upcoming Recession – in 2019
The Economist Magazine’s annual – Special section on the world economy focused in October 2018, on the impact “toxic politics and constrained central banks will have on the next downturn.
The rich world and countries are not prepared for the next recession. Globally there is polarization in nations and nationalists’ parties are often gaining vote and rising in political powers. That simply indicates the restricted trade and closed borders- that will impact business. The next recession is going to be more diversified and with unpredictable dimensions.
In 2019 – The indicators of recession
In the end of 2018, unemployment is historically low, and consumer confidence is historically high, including the GDP growth became higher.
On the contrary, there have been escalation in tariffs and trades, BREXIT, concentration of trade due to protectionist policies, and everywhere the nationalist and populist governments are being elected which further will reduce the trade. These are going to reduce the investor’s confidence.
Global instability is higher and that is also not a very good indicator for business, as business likes the stability. More military conflicts and crisis of Syria, Yemen and Middle East are having no end.
The Federal Reserve has hiked the interest rates that mean a good signal for savers. This higher interest rate makes loan costlier and it would impact on housing and business expansion as loans are going to be higher.
The natural calamities are increase, and people are still not noticing the impact of climate change. That is a huge cost which is paid by economies.
Recession in India
Former Chief Economic Advisor in Modi govt., Arvind Subramanian, has said in December 2018, that India's economy is in danger at the moment. It should be prepared to overcome recession. He further added that GST & Demonetization are factors to draw the nation towards recession.
How to avoid the recession: Globally
It is not sure, that recession would occur in 2019, yet it is suggest to the governments to be ready for unseen events. Countries need to have adequate savings, and insurance coverage.
The government should avoid polarizing the nation as polarizing does hamper the economy. Polarization does not let the system work efficiently, while the growth lies in the ‘efficient working of the system’.
The trade should be open in spite of a populist believe. There should be a sense of moral obligation.
How India should tackle the recession?
India should be prepared for the global recession even if it does not happen in predicted year. Un-preparedness will cost higher fiscal deficit and revenues will fall. Make in India should be highly selective in investments. India should invest less in certain industries.
