Weakening of the American economy is bad news, not just for India, but for the rest of the world too.
A recession normally takes place when consumers lose confidence in the growth of the economy and spend less.
This leads to a decreased demand for goods and services, which in turn leads to a decrease in production, lay-offs and a sharp rise in unemployment.
Investors spend less as they fear stocks values will fall and thus stock markets fall on negative sentiment.
The US saw one of its biggest recessions in 2001, ending ten years of growth, the longest expansion on record.
The dot-com burst hit the US economy and many developing countries as well. The economy also suffered after the 9/11 attacks. In 2001, investors’ wealth dwindled as technology stock prices crashed.