BUSINESS CYCLES

IN THE
INDIAN ECONOMY
Presented
By
GROUP 8

The periodic but irregular fluctuations found in

the aggregate economic activity of nations is
known as BUSINESS CYCLE
The fluctuations in business activity can be
measured by
-percentage change in real GDP
The business cycles contains of two PHASES
EXPANSION
CONTRACTION

PHASES OF BUSINESS CYCLE

Expansion- Development i.e. The higher levels
of business activity
Recovery
Boom
Peak
Contraction- Decline in the growth rate i.e.
slowdown of economy
Recession
Depression
Trough

EXPANSION
Recovery
Recovery phase indicates the rise in Economic activities
The point from depression to expansion is the revival
phase
Where the customers confidence starts to increase
Boom
Business starts to increase their levels
Increase in national income and economy
Unemployment level falls
Peak
After reaching its peak the output starts to stand still
Customers confidence starts to decline
People stop buying and GDP declines

CONTRACTION
Recession
Reduces the levels of buying, selling, production and
employment
Negative growth for two consecutive quaters
Inflation drops
Depression
Also known as slump, low economic activities
Fearful stage of the business cycle
Decline in general output and employment
Trough
The contraction phase reaches a minimum
Economy hits bottom and the general output stands
still
End or recession and this is where the growth starts

INDICATORS
Leading indicators are indicators that usually change
before the economy as a whole changes.They are
therefore useful as short-termpredictorsof the
economy.
Stock Marketreturns are a leading indicator

Lagging indicators are indicators that usually change

after the economy as a whole does. Typically the lag
is a few quarters of a year.
The unemployment rate is a lagging indicator

Coincident indicators change at approximately

the same time as the whole economy, thereby
providing information about the current state of
the economy.
There are many coincident economic
indicators, such asGross Domestic Product,
industrial production, personal income and
retail sales.
A coincident index may be used to identify,
after the fact, the dates of peaks and troughs in
the business cycle

EFFECTS OF DIFFERENT
PARAMETERS IN THESE
PHASES

STAGE
S

INTERES
T RATES

O/P

PRODU EMPLO- PRICES PURCH POLICI

YMENT
A-SING ES
CTIVIT
POWER
Y

PROSPE
RITY
STAGE

Neutral

Increa Increas
ses
es

PEAK
STAGE

Rising

Rising Rising
Lowere
Stron Strongly d
gly

RECESSI
ON
STAGE

Peak

Falling Falling

Decreas Weak
ing

Decreas Policy
e
Eases

RECOVE
RY
STAGE

Low/
Falling

Gradu
ally
Increa
sing

Increasi
ng

Increas
es

Gradual
ly
Increasi
ng

Increas
es

Decreas Increas
es
es

Policy
Neutral

-Short
rate:
Rising
-Bond
yields:
Rising

Policy
Contrac
tion

Gradual
ly
Picking
up

High

Policies
:
stimulat
ive

6.5

4.0
1.0

-2.5
-5.5

4.0

IMPACT ON ECONOMY
Till 1970s India was a country dependent on
agriculture
The rise and fall of GDP was dependent on the monsoon
The major political intervention which lead to downfall
was due to the prime minister of India at that time Mrs.
Indira Gandhi who raised the situation of emergency
Later when morarji desai took charge as the prime
minister of the country development started again
The second blow to the nations economy was in the
year 1991 due to the oil prices hike which took place in
Kuwait led to a situation where India did not have
sufficient funds to clear their debts

This was when government bought in the

concept of LPG
Then later due to this LPG a new
phenomenon of overestimating the demand
took place which again resulted in crisis
India enjoyed the growth rate of 9% till 2008
where it faced an economic slowdown due
to the recession that took place in US

EXPECTED
FUTURE