What are the measures taken by India to combat recession?

Answer 1

Introduction

The Great Recession is a marked global economic decline that began in December 2007 and took a particularly sharp downward turn in September 2008. The global recession has affected the entire world economy, with greater detriment to some countries than others. It is a major global recession characterized by various systemic imbalances and was sparked by the outbreak of the U.S. subprime mortgage crisis and financial crisis of 2007-08. The economic side effects of the European sovereign debt crisis, austerity, high levels of household debt, trade imbalances, high unemployment and limited prospects for global growth in 2013 and 2014 continue to provide obstacles to full recovery from the Great Recession.

Impact of Recession on Indian Economy

As the saying goes, "When US sneezes, the world catches cold", the recession that originated in US, did not take much time to engulf the whole world including India. The global economic recession has taken its toll on the Indian economy that has led to multi-crore loss in business and export orders, tens of thousands of job losses, especially in key sectors like the IT, automobiles, industry and export-oriented firms.

Steps taken by Indian Government to weather the crisis

Measures taken in the past

The Indian government had unveiled a Rs.300, 000 crore package to pump prime the economy with specific measures for various sectors. This amount was spent on revitalizing stake holders such as exporters, housing, infrastructure and textiles. A four-percent cut in Value Added Tax had also been announced to help the corporate sector in general. This apart, additional allocation had been made towards various incentives for exporters, guarantee of export credit, full refund of service tax to foreign agents and refund of service tax under the duty drawback scheme. Relief for exporters included a 2% interest subvention up to March 2009 for pre- and post-shipment export credit for all exports. Additionally, a Rs.350-crore booster for schemes like Market Development Assistance (MDA) and Market Assessing Scheme has been granted to help exporters develop new markets. Other measures in the offing included easy access to the credit market for exporters, textile manufacturers and farmers collectively to the tune of Rs.9, 000 crore. Of the total outlay, a Rs.4, 000 crore line of credit was extended to the National Housing Bank (NHB) and a similar allocation for the Exim Bank. The remainder of the rescue package was utilized for the relief of farmers and infrastructural projects.