Recession

In News

• Recently, there are signs of economic weakness and inflation emerging in markets like the US raising the questions of recession. 

About Recession

• Meaning: 
  • A recession is when the economy stops growing and starts shrinking.
  • It means not only shrinking GDP but also declining incomes, employment, industrial production and retail sales.
  • It happens when the value of goods and services produced in a country known as the gross domestic product declines for two consecutive quarters, or half a year.
  • A recession ends when economic growth returns.
• Causes:
  • Rising in unemployment.
  • Rises in bankruptcies, defaults, or foreclosures.
  • Falling interest rates.
  • Lower consumer spending and consumer confidence.
  • Falling asset prices, including the cost of homes and dips in the stock market.
• How to prevent it?
  • It includes targeted tax cuts or spending increases on safety net programs like unemployment insurance that kick in automatically to stabilise the economy when it is underperforming.
  • Approving new spending on infrastructure projects in order to stimulate the economy by adding jobs, increasing economic output and boosting productivity.
  • In the prevailing market situation, hybrid funds are best placed to protect the downside for the investor.
  • Avoid investing in property as builders and housing finance companies are luring buyers with big discounts and low loan rates.
  • It is always a good idea to diversify the portfolio with Gold and Foreign reserves to reduce the risk.
  • Create an emergency corpus while the jobs are vanishing.

Source: IE