Impact of Economic Crisis on India

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Global Financial Crisis: Impact on India’s Poor
Some Initial Perspectives

Rajiv Kumar Bibek Debroy Jayati Ghosh Vijay Mahajan K. Seeta Prabhu



Global Financial Crisis: Impact on India’s Poor

Disclaimer: The views in the publication are those of the authors’ and do not necessarily reflect those of the United Nations Development Programme. Copyright©2009 by the United Nations Development Programme (UNDP) India The articles can be reproduced in whole or part with relevant acknowledgement to UNDP and the authors in the following manner: Name of Author, Year of Publication, Published by UNDP India.

Contents
Global Financial Crisis: Impact on India’s Poor Some Initial Perspectives Global Financial and Economic Crisis: Impact on India and Policy Response Rajiv Kumar Growth Downturn and Its Effects Bibek Debroy Global Crisis and the Indian Economy Jayati Ghosh Impact of the Economic Downturn on Non-farm Sector Workers Vijay Mahajan Impact of Financial Crisis on India’s March Towards MDGs K. Seeta Prabhu About the authors 5

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Global Financial Crisis: Impact on India’s Poor

Global Financial Crisis: Impact on India’s Poor Some Initial Perspectives As part of contribution by the United Nations Development Programme (UNDP) to the ongoing dialogue on the impact of the global financial crisis, we present in this collection some ‘initial perspectives’ on its impact on the poor in India, written by some of the country’s leading economists and analysts. Rajiv Kumar presents a succinct analysis of the channels through which the financial crisis has impacted the Indian economy while Bibek Debroy examines the impact of the slowdown in economic growth at a disaggregated level – both by sectors and by regions. Jayati Ghosh analyses the impact of the crisis on agriculture, migrants and homebased workers. Vijay Mahajan unfolds the differential impact of the financial crisis on goods and services consumed by the masses and the elite. K. Seeta Prabhu from UNDP India highlights the likely impact of the financial crisis on the achievement of the Millennium Development Goals and on human development. In keeping with UNDP’s perspective, these papers focus on ‘people’, particularly the poor: in agriculture, in the informal sector, in non-farm activities; and on the goods and services they consume. They delineate the conundrums emerging from the development pattern followed, thus far, and point to the need for policy actions to transform the situation to one of enlarging the range of choices and opportunities for the vulnerable sections of the population. We hope this compilation of viewpoints from independent analysts will facilitate debate and the emergence of viable solutions that strengthen the linkages between economic growth and human development.

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Global Financial Crisis: Impact on India’s Poor

CHAPTER

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Global Financial and Economic Crisis: Impact on India and Policy Response Rajiv Kumar Director & Chief Executive, Indian Council for Research on International Economic Relations (ICRIER), New Delhi

The impact of the global crisis has been transmitted to the Indian economy through three distinct channels, viz., the financial sector, exports, and exchange rates. On the financial front, the Indian banking sector was not overly exposed to the sub-prime crisis. While exports of both goods and services, still account for only about 22 percent of the Indian GDP, their multiplier effect for economic activity is quite large as the import content is not as high as for example in the case of Chinese exports. Therefore, an export slump will bring down GDP growth rate in this year. The third transmission channel is the exchange rate, as the Indian Rupee has come under pressure. In terms of policy response, there is not much room for further fiscal policy action as the consolidated fiscal deficit of the central and state governments in 2008-09 is already about 11 percent of the...
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