What is Recession & its Causes

Recession is a Worldwide phenomenon. About 90% of the Working Population is directly affected by the term Globally. The people indirectly affected by it are the Families of Workers. It is defined as:

“A consecutive Record of Negative Report in the Gross Domestic Product (GDP) of a Nation for two consecutive Quarters.”

Here is a more in-depth Analysis of the Reasons for Recession Decadewise:

1980s: It initiated way back in 1980s when the transition from Papers to Digital form was just starting and the Bull situation which we witnessed 20 Years back, was in its initial Stage. This was the Time when even owning a Television was a Luxury. Infrastructure and Lifestyle was very Basic and Education till Graduation was considered highly. Documents and Letters which were Typed instead of Hand-written, were given more importance. People were aware about the presence of Computers somewhere but seeing one and working on them was still a far-fetched Destination. The terms ‘Information Technology (IT)’ and ‘Information Technology Enabled Services (ITES)’, were not even coined.

By the End of the Decade, various Courses in Typewriting were on its Peak and its Speed was a main criteria of Selection for various Positions in Government and Private Offices. This opened a lot of Work Opportunities for General Public especially Girls, who became Employable after completing Basic Education and a Course in Typewriting.

1990s: End of 1980s and the beginning of 1990s saw the arrival of Computers in India by our former Prime Minister, Late Mr. Rajiv Gandhi. It was a Revolution in Indian IT Industry. By the Middle of this Decade, the Basic Infrastructure of IT was completed. Computerisation of various Government Offices was prevalent as a much-needed Drive. Demand for Typewriting Courses started slowing down and its Place was taken up by various Computer Courses. Many Big and Small Computer Training Institutes popped up throughout the Country. Demand by Students to learn operating a Computer was extreme but Supply was very Low.

 
The Demand for Computer-Literate Professionals for various Government and Private Jobs also flourished and a better Future was nearing. Even little Knowledge of Computers was enough and given high importance. The Per-capita Income of individuals increased with the opening up of various Entrepreneurial Ventures which were wholly based on Computers. Many new Courses on Software and Hardware Engineering also came up in Colleges and they witnessed a heavy Interest by Students. The Fees for such Courses was very high but yet there was no dearth in the Demand. Thus, by the End of this Decade, we saw the Dawn of Information Technology in India which was set to Position India firmly on the World Map of Technical expertise and IT Education.

2000s:  The start of 21st Century was very special. Computers had established themselves in India and Supply of Education in IT was equal to its Demand. Lots of Management Colleges mushroomed at this Time and were high in Demand. MBA, MCA and related Courses were given unmatched Value and MBAs of 25-26 Years of Age, were recruited with high Pay-packages. There was too much Gap between the Youths of the same Age in the past Decade, who used to get Rs 10,000/- – 15,000/- with the equal Years of quality Education and the Youths of 21st Century who started getting Rs 40,000/- – Rs 50,000/- just after doing MBAs or MCAs. Per-Capita Incomes boomed in Proportion with many Students getting recruited to IT Companies and other flourishing Industries with ever increasing Salaries.

The Main Industries which were directly affected by this Boom were:

a) Real Estate
b) Aviation
c) Banking
d) Hospitality

More-and-more people, started preferring Flights over Trains, even for Short Distances. They started opting to Stay at a 5-Star Hotel on Vacations in Place of 1-Star, which their Parents preferred in earlier Times. This happened due to the accumulation of Wealth and a large portion of Disposable Incomes within Families. So, the Graph was going higher-and-higher in accordance with the Stock Exchange of India and its GDP.

2011 – Present: Everything in the World is cyclical in Nature and situations repeat themselves. Similarly, with every Boom comes a Blast too. Too much of anything is dangerous and this is what is happening since the End of the last Decade and is continuing. Because of so much demand, lots of IT and Management Institutes came up in every corner and started Charging heavy Fees. But, Jobs were Limited and Supply of Job-seekers was high. The Result was that even highly-qualified MBAs, MCAs and Engineers were not getting the Jobs they very much deserved and hence started opting for low-paying ones which were nowhere related to their Qualifications.

As in the time of Boom, the Industries worst affected during this low-Phase were:

a) Real Estate
b) Aviation
c) Banking
d) Hospitality
e) Information Technology

The Professionals which were directly affected were:

a) Software Engineers
b) Management Graduates

Those who were indirectly affected were:

a) Bankers
b) Aviation Professionals

There was a lot of Competition within the Industries as many Big and Small Businesses opened and this affected the Financial Health of the Corporations. The Times were very different than those from 95 – 00 when only a few Companies were enjoying Monopolies. Many Corporations started filing for Bankruptcies at this time and started firing their Staffs. Highly qualified people were now becoming Jobless and were forced to settle for low-paying Jobs.

As a Result, people have started downgrading their Lifestyle now. They are again back to Trains from Flights. The dismal performances of all the Airlines in India since last few Years is a Proof enough. They are again settling for low Star Hotels. So, overall they are again downgrading their Lifestyle which is extremely difficult as they are used to a lavish Lifestyle. 

Recession which was witnessed in 2008 and is again raising its Head. There are a lot of Lessons to be learnt both by our Governments and Industry otherwise the situation can go out of control.

 

Regards,

Pragya Banerjee
MBA (Finance); 7+ years of work experience
email: pragyasonal@gmail.com
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