A recession can generally be described as two consecutive quarters of negative GDP growth, a decline in overall economic activity based on GDP and the job market.

Simply put, it means businesses overall lose money and the industry produces less product for two consecutive quarters or 6 months.

For a wider audience this means –

1. high unemployment rate
2. Slowdown in the stock market and other investments
3. Salary/income does not increase much

The slowdown in India may seem like a casualty right now, but depending on how long the Russo-Ukraine war lasts, the global economy could actually be in jeopardy. If this happens, India cannot escape the consequences, even if it does not enter a recession.

Since February 2022, due to the Russo-Ukraine war, the global economy has seen a sharp rise in crude oil prices. It is because of the sanctions imposed on Russia which led to a halt in the export of crude oil across the world, due to which the prices of the same increased. The rising demand for crude oil, while the supply was limited, had a direct impact on the food prices in the country. Apart from this, due to China’s zero Kovid lockdown policy, many manufacturing units were closed, affecting the supply chain.

These are some of the factors that can lead to a recession.

How to prepare for a recession – things you should consider:

One)
Reevaluate your budget on a monthly basis – Cut down on unnecessary expenses and save as much as you can. Avoid EMI to buy and reduce luxury goods.

b)
Build your emergency fund by growing your savingsAt least 3 months of your salary/income or 6 months of your expenses should be set aside as an emergency fund.

C)
Prioritize loan repayment – Check the balance and make sure you have enough funds for your loan repayment. Make sure your credit card bills are paid and don’t try to carry them forward.

D)
Delay in major purchases or aggressive investments If there is a recession, the chances of job insecurity/regular income are reduced. Thus, delayed buying which can be seen at a later stage.

I)
keep up-skilling – Enhance your knowledge to create stability in your jobs, so that short term hiccups don’t hit your job. It will also help in creating financial security

F)
Create a Financial Plan Now Lack of financial security can affect every part of our life. By running a regular checklist on budgeting, saving+investing, doing the work of compounding for you, creating strong financial goals, you can prepare yourself safe and well for any downturn, strong enough to get through tough times can maintain.

Views are personal: Author – Sneha Jain is Partner & CEO, M/s WealthTrust Capital Services

Disclaimer: The views expressed are those of the author and are personal. TAMPL may or may not subscribe to it. The views expressed in this article/video are in no way intended to predict or time the markets. The views expressed are for informational purposes only and do not imply any investment, legal or taxation advice. Any action taken by you based on the information contained herein is your sole responsibility and Tata Asset Management will not be liable in any way for the consequences of such action by you. There is no guarantee or assured return under any of the schemes of Tata Mutual Fund.

Mutual fund investments are subject to market risks, read all the documents related to the scheme carefully.