Is India in a recession or is it just a slowdown?
We often use the term recession loosely every time we feel the economy is not doing well. But do we even know what the real definition of a recession is?
According to Investopedia: 'The working definition of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP)'.
Since India has not reported a negative GDP number in the previous quarter, to answer the question, no India is not in a recession. It is only in a slowdown.
Although a slowing economy is unpleasant, it is normal. Most people forget that much before this pandemic, India was already in a slowdown. But since the stock markets didn't reflect that, it wasn't very apparent. But yes, these times are unusual. As only a few months ago all economic activity had come to a standstill.
Even now the economy might seem like it's recovering but it isn't. And it is difficult to predict when we can see actual recovery. As we are still struggling to control the virus.
Experts also believe there can be more pain ahead for us. And such uncertain times mean a lot of things to a lot of people. Some, due to no fault of theirs might lose jobs or might have to shut their businesses. Forcing them to their curb spending and pinch pennies. But the good news is there are steps you can undertake to improve your financial health.
MoneyTip#1: Get organised
As the crisis has moved from healthcare to financial, everyone has been panicking. They are worried about everything from a regular monthly source of income to oncoming healthcare costs and rightly so.
In such circumstances, the first step is to organise and streamline your finances. Start by assessing your financial situation. Gather all your financial statements, current, savings, investments, loans. It's important to know where you stand, to make amends.
Reassess your monthly budget. It will help you identify the areas where you can make cuts, everything barring necessities like utilities, grocery, EMIs or rent.
Don't be afraid to negotiate. If you are unable to pay your EMIs on time, inform your lender. People don't realise that in such cases the key is to communicate. Maybe your lenders are offering flexibility or postponing your payments. Their response might surprise you. You have to understand that these times are different. There is a high probability lenders might be lenient as several people are affected by the crises.
Furthermore, don't be shy to take full advantage of all government programmes offered during the pandemic. Check with your lenders if you are eligible. Their sole purpose is to get you through these tough times.
MoneyTip#3: Stock up your emergency fund
The need for an emergency fund has never been more apparent.
The idea is to have 6- 9months of living expenses in an accessible, low-risk investment instrument, for emergencies like today. Where suddenly you find yourself without a source of income.
An emergency fund will ensure that your necessities are fully covered, allowing you to focus on other issues.
So even now, any money you save by on a stringent budget should go towards your emergency fund. If you already have one ensure it is fully-funded.
MoneyTip#4: Invest only if you have surplus funds
Continue to invest if you have funds in excess. If you haven't already, invest in Gold. As it is an excellent store of value and a great investment avenue in uncertain times. Indian experts believe you must keep 10-20% of your portfolio in Gold.
Existing investors must avoid selling their stock holdings unless they are short of funds. Every financial expert will advise you against it. As history tells us, stocks markets have performed exceedingly well after such meltdowns.
NotaMoneyTip: Stay calm, safe and happy
Last but not the least stay calm, stay happy. As a wise man once said: When the going gets tough, the tough get going. It is the only foolproof way of sailing through difficult times.
Enjoy your life, as all of this, is temporary and you will overcome it.
You are probably already saving some money by not stepping out for entertainment or food. (areas where people tend to overspend). Combine it with these few steps mentioned above will help sail through these challenging financial times.
Just remember, the best thing for you is to keep you moving forward. There is light at the end of the tunnel.