Effect Of Financial Crisis On Indian Economy


Financial Problems - a very common word heard in the recent few years. Year 2008, the start of the credit crunch. It was like Tsunami waves which had taken away almost everything from the economies. Downturn can be explained as "significant decrease in the economical activity lasting lots of months, which is generally obvious in real GDP, real income, job, industrial creation, imports-exports, and wholesale-retail sales". Powerful developed economies like US and the Euro area weren't in a position to control or reduce the effect of recession. The emerging economies like China, India and Brazil even though influenced by downturn but retained a good control over it. Through this research dissertation, I wish to discuss the result of financial crisis on a developing country. So, I've chosen India to go over this issue.

India is one of the powerful emerging economies on the planet. In the recent years, India shows a significant growth in GDP and overall. With recession and its result overall the earth, India with its good policies was able to prevent recession from getting into the deep roots of the united states. Despite the fact that we can say financial meltdown didn't have an effect on India but nonetheless there are a few sectors badly afflicted by the problems. So I in essence I'd be discussing about the result of financial crisis on India and the transmission of crisis from developed countries to India.

Literature Review

The books review because of this research includes the effect of financial crisis on the GDP growth rate of the united states. The GDP progress rate of India was increasing at an instant rate but showed a down-turn due to the after aftereffect of downturn. The GDP progress rate of the country was above 8. 5% in 2010 2010 and it was reduced to 8. 2% in the beginning of 2011. The GDP was influenced as a result of country's globalisation. In the last 10 years the country's integration into the world economy was really fast. Due to this rapid development, the ratio of imports-exports, as a proportion of GDP grew from 21. 2% in 1997-98 to 34. 7% in 2007-08. This development shows the enormous growth of current economic climate. During the period of 2003-08, the investment funds share in GDP increased by 11%. Domestic money was available in mass but still it was expensive than international funding. The expansion potential of India was strong in the global market, so the foreign investors were ready to provide funds at less expensive and therefore take risk. As a result of this globalisation the financial meltdown on the global economy affected the Indian overall economy.

Country's banking sector is relatively one of the healthy sectors in the economy so when the recession impact emerged to India both Authorities of India and RBI (Reserve Loan provider of India) taken care of immediately the task in coordination and discussion. The actions of RBI comprised of monetary accommodation and counter cyclical regulatory forbearance. RBI procedures helped the financial sector of the country to improve the initial main liquidity which portions up to 7% of country's GDP. This shows the way the bank sector of India handled the result of financial crisis.

On the other hands, the monetary activities of the country were slowing down. As the true GDP rate was diminished, the service sector, where India is among the finest because of the powerful human tool, was infected. The service sector includes building, travel & communication, trade, hotels and restaurants sub-sectors. Business outsourcing is another major services provided by India. Most of the business outsourcing was done for all of us companies but scheduled the financial crisis, this section affected badly. Therefore has damaged the career sector of the united states. India is a country with high populace, so hook upsurge in the unemployment means so many of them has lost careers. This must be the first-time in seven years, exports have declined terribly. The industrial production index in addition has showed a poor growth. The uncertainty around the downturn has decreased the business enterprise confidence.

And the country has a decelerated investment demand. Before downturn, Foreign Institutional Buyers (FII) was the majority purchasers in the Indian stock market. They bought large numbers of stocks by investing millions of dollars, as Indian current economic climate was a expanding at a rapid rate. But the subprime crisis affected them very terribly. Some of the companies were less than cash, whereas others were trapped with debt. Even there are companies which was required to declare bankruptcy. These after effects had a great effect on the Indian stock marketplaces.

The adverse effect of financial crisis on the economic growth of the country can affect the poor and the meals security of the united states. The upsurge in food price in India was relatively less than that of global food prices. When the price tag on food globally increased by 150%, in India it was just 23%. This occurred between 2005 and second one fourth of 2008. After that, there was a decline in the food prices but it is still much higher than that at the start of the decade. If likened, the inflation of food articles was 10% and this of standard inflation was 6%.

India is one of the most notable receivers of overseas remittance. India secure the first position with 17. 4 billion All of us $ in 2003. Middle-east is one of the main locations for migrants from India. But after financial crisis, the Gulf countries, mainly UAE got affected badly. UAE is one of the countries, where we will get a great deal of Indians in the structure sector which went down after the turmoil. This has afflicted the move of remittance from UAE to India. Corresponding to World Lender the remittance flow to growing countries can decrease by 7%-10%. This may affect the forex reserve and investment sector of the country.

While concluding the literature part, it is clear that Indian market was affected badly. But credited to strong procedures and high liquidity, the federal government could reduce the after effect for an extent.


Through this issue I'd like to find answers for some questions. They are simply

What will be the effects of global financial crisis on Indian overall economy?

How did turmoil affect Indian economy?

What are the precautions and options used by the accountable authorities against problems?

In order to go over these questions, I would like to analyze online as well as catalogs & newspapers, so that I get a clear-cut idea on financial meltdown and Indian overall economy. Financial crisis is a familiar matter, so the details about it can be found online. To get this done research dissertation, online details are not enough, but interview with concerned individuals will be helpful for the project. When the research is performed about the result on Indian overall economy, the current economic climate is split into different sectors. Banking sector is one sector that was successful in protecting against the recession result. Supplying more importance to Banking sector will be sufficient to explain the effect on Indian overall economy.

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