Budget will be driven by election motives

Finance Minister P Chidambaram will present the Union Budget on February 29. The presentation of the Budget is one of the most closely followed event in India as it affects almost every one right from the housewife, salaried class, corporates, entrepreneurs and even those who have retired.

To find out what are the expectations of the people about the budget, IBNLive organised an online chat with financial journalist Sandipan Deb on Saturday.

Here we reproduce the full text of his chat.

Sadik Ismail: What you think is the driving force behind Budget 2008? Is it the poor man, corporate, election, middle class or a consensual approach?

Sandipan Deb: I hope I am wrong but I fear that this Budget would be driven by election motives more than anything else. So expect lots of sops to the "aam aadmi", and dread the knowledge that most of the money will maybe not reach. I don't want to sound overly pessimistic, but I think this is what will happen. We are at a critical point in our economic and political history when the economy is doing marvellously but politically we are fragmented. I think it will be a politician's budget, not an economist's. read full story

Fed boss says 2008 outlook worse

Federal Reserve chief Ben Bernanke has said that the outlook for the US economy in 2008 has worsened.

His comments in Washington come after leading investment banks warned that the US was heading for a recession.

However, Mr Bernanke said the central bank was willing to act in a decisive and timely manner to ensure the economy remained on an even keel.

Analysts said this was a strong sign that the Fed would cut interest rates again when it meets later this month.

Substantive action

The bank has cut rates three times since last summer, most recently in December to 4.25% - the lowest level in two years.

During his speech on Thursday, Mr Bernanke said the Fed was prepared to "take substantive additional action as needed to support growth and to provide adequate insurance against downside risks". read full story

U.S. Economy Unexpectedly Sheds 17,000 Jobs

The economy lost 17,000 jobs in January, the Labor Department reported on Friday, the first monthly decline in four years and the most striking evidence yet that the United States may be slipping into a recession.

Until now, the labor market had been growing at a steady if softening pace. Many economists pointed to expanding payrolls as the final holdout in a sluggish economy weighed down by trouble on Wall Street, the collapse of the housing bubble, and a cascade of credit problems linked to soured subprime mortgages.

But the January employment report cast the job market in a startlingly darker light. Jobs disappeared across a broad spectrum of professions, with the steepest losses coming in the manufacturing, construction and goods-producing industries.

Adding to the gloom, the government said that the level of employment was sharply lower in December than it had originally estimated. The new figure was based on an annual review of every job covered by unemployment insurance. read full story

What is Recession?

I come across most of folks ask me about what is recession and how it affects the country's economy. It gives me chance to bring some good resources into this blog. I have collected excerpts from few sites and posting here.

about.com

The official definition of recession is when GDP growth is negative for consecutive two quarters or more. However, you can feel like you are in a recession before it has officially started because it is usually preceded by several quarters of slowing but positive growth. It feels like a recession when GDP growth slows, businesses stop expanding, employment falls, unemployment rises, and housing prices decline.

For example, the stock market crash and subsequent economic downturn in 2000 was not a recession in technical terms. GDP growth was negative in Q3 2000, Q1 2001, and Q3 2001. However, anyone who lived through it knows that it felt like a recession during all that time. And in fact, GDP growth did not reach over 3% until Q3 2003.

Wikipedoa.org

A recession is a decline in a country's gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year.

An alternative, less accepted definition of recession is a downward trend in the rate of actual GDP growth as promoted by the business-cycle dating committee of the National Bureau of Economic Research.[1] That private organization defines a recession more ambiguously as "a significant decline in economic activity spread across the economy, lasting more than a few months." A recession may involve simultaneous declines in coincident measures of overall economic activity such as employment, investment, and corporate profits. Recessions may be associated with falling prices (deflation), or, alternatively, sharply rising prices (inflation) in a process known as stagflation. A severe or long recession is referred to as an economic depression.

howstuffworks.com

When the nation is in the early part of a recession, nobody knows for sure if it is actually a recession or not. The economy might turn around the next day, which would mean the contraction was just a temporary decrease in activity along a mostly upward track. Economists don't know if the economy is in recession until they can gather data over an extended period of time -- typically six months or more.

There is no strict definition for recession. Different people consider different factors when making the assessment.

Some economists and journalists define a recession as two consecutive quarters (three-month financial periods in the year) in which the gross domestic product (GDP) decreases.

In the United States, the economy follows a somewhat regular pattern of expansion and contraction. The economy will typically expand steadily for six to 10 years and then enter a recession for six months to two years. The point where the recession begins is known as a peak, and the point where it ends as known as a trough. Following the trough, the economy expands again toward another peak. Economists call the period of time between two peaks a business cycle.