Topics: Monetary policy, Subprime mortgage crisis, Economics Pages: 7 (3677 words) Published: October 30, 2014

Impact of US Recession of 2007-08 on Indian Economy and recommendations for future Date: August 28, 2014.
Research Methodology
Backdrop of the crisis
(i) Boom in World Economy and Thriving Asset Prices
(ii) Growth in US Economy - Interest Rate Cut and Deregulation (iii) Failure of the US Leadership in Anticipating the Crisis Development of the crisis
(i) Sub-prime mortgage
(ii) Securitization and Repackaging of Loans
(iii) Excessive Leverage
(iv) Misleading judgments of the Credit Rating Organizations (v) Mismatch between Financial Innovation and Regulation
(vi) Failure of Global Corporate Governance
Impact of the Economic Crisis on India
(i) Offshoot of Globalized Economy
(ii)Aspects of Financial Turmoil in India-
Capital Outflow
Impact on Stock and Forex Market
Impact on the Indian Banking System
Impact on IT Sector
Impact on Industrial Sector and Export Prospect
Impact on Employment
Impact on poverty
(iii) Indian Economic Outlook
India’s Crisis Responses and Challenges
(i) RBI’s Crisis Response
(ii) Government’s Crisis Response
(iii) State of Economy in Crisis
Options ahead
(i) Diversifying Exports
(ii) Boosting Domestic Consumption
(iii) Enhancing Public Spending
(iv) Generating Employment
(v) Provisioning Credit to Productive Sectors
(vi) Need for Structural Reforms
(vii) Increased purchasing power of the people
The objective of this study is analyzing the situation of Indian markets post US Recession of 2007-08. As an outcome of this we expect to provide our recommendations on various strategies, which can be adopted by the Indian Economy as a whole to reduce the impact of such recessions on our local markets. One of the options that would be explored is diversifying investments and business across the world and reduces dependency on any one region. Background

With the increasing integration of the Indian economy and its financial markets with rest of the world, there is recognition that the country does face some downside risks from international developments. The risks arise mainly from the potential reversal of capital flows on a sustained medium- term basis from the projected slowdown of the global economy. The Indian economy looked to be relatively insulated from the global financial crisis that started in August 2007 when the sub-prime mortgage crisis first surfaced in the United States (US). In fact, the Reserve Bank of India (RBI) was raising interest rates until August 2008 with the explicit objective of cooling the economy. But when the collapse of Lehman Brothers on 23 September 2008 morphed the US financial meltdown into a global economic downturn, the impact on the Indian economy was almost immediate. The challenges that confronted the Indian economy in 2008 - 09 fall into two Categories - the short-term macroeconomic challenges of monetary and fiscal policy and the medium-term challenge of attaining and sustaining high rates of economic growth. The short-term macroeconomic challenges covers issues such as the trade-off between inflation and growth, the use of monetary policy versus use of fiscal policy, their relative effectiveness and coordination between the two. The medium-term challenge includes the tension between short-and long-term fiscal policies, the immediate longer-term imperatives of monetary policy and the policy and institutional reforms necessary for restoring high growth. Research Methodology

Against this financial crisis we plan to work on following areas: Causes of global financial crisis
Study impact on Indian economy
India’s Crisis Responses and Challenges
The Options Ahead
“The policy makers left the financial industry free to innovate and what it did was to innovate itself, and the rest of us, into a big, nasty mess.” PAUL KRUGMAN
The current global economic crisis is widely viewed as a glaring example...
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