A global recession is a period of global economic slowdown.

The International Monetary Fund (IMF) takes many factors into account when defining a global recession, but it states that global economic growth of 3 percent or less is "equivalent to a global recession".[1][2] By this measure, three periods since 1985 qualify: 1990-1993, 1998 and 2001-2002.[3][4]

Informally, a national recession is a period of declining productivity. In a 1974 New York Times article, Julius Shiskin suggested several rules of thumb to identify a recession, which included two successive quarterly declines in gross domestic product (GDP), a measure of the nation's output.[5] This two-quarter metric is now a commonly held definition of a recession. In the United States, the National Bureau of Economic Research (NBER) is regarded as the authority which identifies a recession and which takes into account several measures in addition to GDP growth before making an assessment. In many developed nations other than USA, the two-quarter rule is also used for identifying a recession.[6] Whereas a national recession is identified by two quarters of decline, defining a global recession is more difficult, because developing nations are expected to have a higher GDP growth than developed nations.[7] According to IMF, the real GDP growth of the emerging and developing countries is on an uptrend and that of advanced economies is on a downtrend since late 1980s. The world growth is projected to slow from 5% in 2007 to 3.75% in 2008 and to just over 2% in 2009. Downward revisions in GDP growth vary across regions. Among the most affected are commodity exporters, and countries with acute external financing and liquidity problems. Countries in East Asia (including China) have suffered smaller declines because their financial situations are more robust. They have benefited from falling commodity prices and they have initiated a shift toward macroeconomic policy easing.[7] The IMF estimates that global recessions seem to occur over a cycle lasting between 8 and 10 years. During what the IMF terms the past three global recessions of the last three decades, global per capita output growth was zero or negative.[3 http://en.wikipedia.org/wiki/Global_recession

Now what is a money market?

Money Market is actually an inter-bank market where banks borrow and lend money among themselves to meet short-term need for funds. Banks usually never hold the exact amount of cash that they need to disburse as credit. The inter-bank market performs this critical role of bringing cash-surplus and cash-deficit banks together and lubricates the process of credit delivery to companies (for working capital and capacity creation) and

consumers (for buying cars, white goods etc). As the housing loan crisis intensified, banks grew increasingly suspicious about each others solvency and ability to honour commitments. The inter-bank market shrank as a result and this began to hurt the flow of funds to the real economy. Panic begets panic and as the loan market went into a tailspin, it sucked other markets into its centrifuge. The liquidity crunch in the banks has resulted in a tight situation where it has become extremely difficult even for top companies to take loans for their needs. A sense of disbelief and extreme precaution is prevailing in the banking sectors. The global investment community has become extremely risk-averse. They are pulling out of assets that are even remotely considered risky and buying things traditionally considered safegold, government bonds and bank deposits (in banks that are still considered solvent). As such this financial crisis is the culmination of the above mentioned problems in the global banking system. Inter-bank markets across the world have frozen over. The meltdown in stock markets across the world is a victim of this contagion. Governments and central banks (like Fed in US) are trying every trick in the book to stabilize the markets. They have pumped hundreds of billions of dollars into their money markets to try and unfreeze their inter-bank and credit markets. Large financial entities have been nationalized. The US government has set aside $700 billion to buy the toxic assets like CDOs that sparked off the crisis. Central banks have got together to coordinate cuts in interest rates. None of this has stabilized the global markets so far. However, it is hoped that proper monitoring and controlling of the money market will eventually control the situation.

How it has affected India?

In the age of globalization, no country can remains isolated from the fluctuations of world economy. Heavy losses suffered by major International Banks is going to affect all countries of the world as these financial institutes have their investment interest in almost all countries. As of now India is facing heat on three grounds: (1) Our Share Markets are falling everyday, (2) Rupee is weakening against dollars and (3) Our banks are facing severe crash crunch resulting in shortage of liquidity in the market. Actually all the above three problems are interconnected and have their roots in the above-mentioned global crisis. For the last two years, our stock market was touching new heights thanks to heavy investments by Foreign Institutional Investors (FIIs). However, when the parent companies of these investors (based mainly in US and Europe) found themselves in a severe credit crunch as a result of sub-prime mess, the only option left with these investors was to withdraw their money from Indian Stock Markets to meet liabilities at home. FIIs were the main buyers of Indian Stocks and their exit from the market is

certain to wreak havoc in the market. FIIs who were on a buying spree last year, are now in the mood of selling their stocks in India. As a result our Share Markets are touching new lows everyday. Since, the money, which FIIs get after selling their stocks, needs to be converted into dollars before they can sent it home, the demands for dollars has suddenly increased. As more and more FIIs are buying dollars, the rupee is loosing its strength against dollar. As long as demands for dollars remain high, the rupee will keep loosing its strength against dollar. The current financial crisis has also started directly affecting Indian Industries. For the past few years, the two most preferred method of raising money by the companies were Stock Markets and external borrowings on low interest rates. Stock Markets are bleeding everyday and it is not possible to raise money there. Regarding external borrowing from world markets, this option has also become difficult. In the last fiscal year alone, India borrowed $29 billion from foreign lenders and got $34 billion of foreign direct investment. A global recession has hurt external demand. International lenders who have become extremely risk aversive can limit access to international capital. If that happens, both Indias financial markets and the real economy will be hurt in the process. Suddenly, the 9% growth target does not seem that doable any more; we should be happy to clock 7% this fiscal year and the next. However, one positive point in favor of India is the fact that Indian Banks are more or less secured from the ill-effects of sub-prime mess. A glance at Indian banks balance sheets would show that their exposure to complex instruments like CDOs is almost nil. In India, still the major banking operations are in the hands of Public Sector Banks who exercise extreme cautions in disbursing loans to needy people/companies. As a result, we are not likely to see a repeat of sub-prime crisis in India. Though there have been a presence of big US/European Banks in India and even some Indian banks (like ICICI) have some foreign subsidiary with stake in the sub-prime losses, there presence is miniscule as compare to the overall size of Indian banking industry. So at least on this major front we need not worry much. However, a global depression is likely to result in a fall in demand of all types of consumer goods. In 2007-08, India sold 13.5% of its goods to foreign buyers. A fall in demand is likely to affect the growth rate this year. Our export may get affected badly. A negative atmosphere, shortage of cash, fall in demands, reducing growth rate and uncertainties in the market are some of the most visible aspects of an economic depression. What started as a small matter of sub-prime loan defaulters has now become a subject of global discussion and has engulfed the global economy scenario.

Greed of somewoes of billions

If you think about this with a cool mind, you will find that the underlying cause of this depression is the greed of those who failed to anticipate the consequence of their actions. On a more ideological front, it is high time to have a rethink on the very idea of free markets and capitalism. I think the time has come to evolve a capitalism where everything works under a broad regulatory framework and we do not see a repeat of this condition where greed of some people can affect the lives of billions. So here concludes my attempt to explain the current economic crisis which has started to affect the lives of all of us. The above explanation is very simple and by no means it presents an accurate picture (i.e the one that includes all the micro/macro factors) of the crisis. However, I hope that it must have given you a broad idea of the reasons behind current economic depression. Feel free to post your comments on this issue. http://www.theindianblogger.com/problems/reasons-for-global-recession-in-plain-simpleenglish/

The recession in the US market and the global meltdown termed as Global recession have engulfed complete world ecomony with a varying degree of recessional impact. World over the impact has diversified and its impact can be observed from the very fact of falling Stock market, recession in jobs availiability and companies following downsizaing in the existing available staff and cutting down of the perks and salary corrections. Globally the financial sector sacking the existing base of employees in high numbers in US the major example being CITI Group same still followed by others in hospitality industry Jet and Kingfisher Airlines too. The cut in salary for the pilots being 90 % can any one imagine such a huge cut in salary. In the globalized market scenario, the impact of recession at one place/ indusrty/ sector perculate down to all the linked indusrty and this can be truly interpreated from the current market situation which is faced by the world since approx 2 month and still the situation is not in control inspite of various measures taken to fight back the recession in the market.The badly hit setor at present being the financial sector, and major issue being the "LIQUIDITY Crises" in the market. In-spite of the various measures to subsidise the impact of the recession and cut down the inflation present nothing really sound have been done. Various steps taken by RBI to curb the present recession in the economy and counter act the prevailing situation. The sudden drying-up of capital inflows from the FDI which were invested in Indian stock markets for greater returns vizualizing the Potential Higher Returns flying back is continuing to challenge liquidity management.At the heart of the current liquidity

tightening is the balance of payments deficit, and this NRI deposit move should help in some small way. To curb the liquidity crises the RBI will continue to initiate liquidity measures as long as the current unusually tight domestic liquidity environment prevails. The current step to curb these being lowering of interest rates and reduction of PLR.However, the big-picture story remains unchanged all countries in the world with current account deficits and strong credit cycles are finding it difficult to bring cost of capital down in the current environment. India is no different. New measures do not change our view on the growth outlook. Indeed, we remain concerned about the banking sector and financial sector. The BOP- Balance of Payment deficit at a time when domestic credit demand is very high is resulting in a vicious loop of reduced access to liquidity, slowing growth, and increased risk-aversion in the financial system. In total the recession have turned down the growth process and have set the minds of economists and others for finding out the real solution to sustain the economic growth and stability of the market which is desired for the smooth running of the economy. Complete businesss/ industry is in dolledrum situation and this situation persist for a longer duration will create the small business to vanish as they have lower stability and to run smoothly require continous flow of liquidity which is drived from the market. In present situation down fall in one sector one day leads to a negative impact on the other sector thus alltogether everyone feel the impact of the Financial crises with the result of the current recession which started in US and slowly and gradually due to linked global world have impacted everyone. Solution for the problem still remain at the top of the mind of every one, still everyone facing the impact of recession but how long is the major question which is of great importance http://www.articlesbase.com/international-business-articles/impact-of-global-recessionon-indian-market-655636.html