Major traits of recession can be summed up as follows:
- There is a general fall in demand as economic activities take a downturn;
- Inflation remains lower or/and shows further signs of falling down;
- Employment rate falls/ unemployment rate grows;
- Industries resort to ‘price cuts’ to sustain their business.
- In the financial year 1996–97, the Indian economy was taken up by the cycle of recession— basically due to a general downturn in domestic as well as foreign demands, initiated by the South East Asian Currency Crisis of mid-1990s. The whole plan of economic reforms in India was derailed and it was only by the end of 2001– 02 that the economy was able to recover.
USUAL REMEDIES TO RESCUE TO ECONOMY FROM THE PHASE OF RECESSION ARE:
Direct and indirect taxes should be cut down so that the consumers have higher disposable incomes (income after paying direct tax, i.e., income tax) on the one hand and the goods should become cheaper, on the other hand, thus there is hope that the demand might pick up.
The burden of direct taxes, especially the income tax, dividend tax, interest tax are slashed to enhance the personal disposable income (i.e, income after direct tax payment)—
Salaries and wages should be revised by the government to encourage general spending by the consumers (as the Government of India implemented the recommendations of the fifth pay commission without much deliberation in 1996–97).
Indirect taxes such as customs duty, excise duty (cenvat), sales tax, etc., should be cut down so that produced goods reach the market at cheaper prices.
The government usually goes on to follow a cheap money supply policy by slashing down interest rates across the board and the lending procedure is also liberalized.
Tax breaks are announced for new investments in productive areas.
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