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Global Economic Crisis And India - Essay

Global Economic Crisis And India

Background of the Global Financial Crisis; What is it all about?

It all began with the one and all American dream, that every American should have a home. Regardless of who you are and what you do, if you are an American, you should have something called a home. Real Estate business was in a boom, and financial agents thought that there wasn't a better time to give away loans. The Household sector was given a boost with increased monetary supply by commercial financial companies, and people were given loans regardless of the credit rating they received. It was never expected that the boom in the Real Estate business would come to such an abrupt end, and the prices would reach all time ...

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achieving short term goals and ignoring warnings from leading economists about long term sustainability of the policy, backfired completely and companies like Lehmann Brothers, Merill Lynch, Freddie Mac and Fannie Mae's "bad assets" reached magnanimous proportions.

An acute credit shortage was experienced in the economy, and simultaneous negative effects started occurring. The credit crunch meant that borrowing interest rates shot up in the market, companies slowed down their investment policies, production declined, lay offs increased, consumption decreased and the whole economy followed the downward spiral. The unemployment rate in the US reached an all time high of 6.1% and industrial growth saw its largest decline in the past three years and fell to 1.1%. The US governments realized the gravity of the situation, and started using monetary as well as fiscal policies to check the diminishing economy. Fiscal policy boost in the way that, an amount of around US$ 1 trillion was ...

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then, the world economy has been affected by this deep economic crisis and India is no different. India being a net import driven economy, with exports (including the service sector) contributing 17% of GDP, is a little less vulnerable than other economies. Moreover we still have a socialistic pattern of economy where there is enough government intervention, which has somewhat checked the situation from becoming graver. At the present scenario it is a bit difficult to exactly quantify the implications of the global financial meltdown, but a few salient features are:- :: Indian IT companies have around 30% exposure to foreign financial services.

:: Funding constraints would result in ...

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PAPER DETAILS
Added: 6/1/2014 11:03:47 PM
Submitted By: nee1
Category: Economics
Type: Premium Paper
Words: 1851
Pages: 7

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