Indian Scenario After the Global Financial Crisis

Topics: Subprime mortgage crisis, Economics, Federal Reserve System Pages: 2 (569 words) Published: February 22, 2009

1.What initiated from the sub-prime mortgage crisis in USA two years ago was lugged forward un-seemingly till it led to the bankruptcy of Lehman Brothers in September, 2008. Thus was the commencement of the Global Financial Meltdown which has spread to all the nations including India. 2.The meltdown has affected the Indian financial system and has already forced the following changes into the national financial scheme, in order to restore some stability: -

a.The Reserve Bank of India has undertaken an objective to increase the liquidity in the system. With this in mind, the RBI have reduced the Cash Reserve Ratio, the repo rates and also the reverse repo rates in the past few months. Further reduction in the rates ( by the end of 2010 ) would encourage more investment into the financial structure of the country.

b.An increase in Government expenditure is also fathomed with a view to financially stabilize the economy with positive cash flows and thus eventually replenish the reserves of the country.

3.Springing back from the downbeat results of the global financial crisis namely: un-employment and downsizing in organizations; decline in the growth rate in exports; and fall in the global commodity prices (thus affecting exports), India could come out unscathed. The following predictions could be made of the economic and financial state of the country subsequent to the end of the crisis: -

a.Presently a decline in the economic growth (from 9%) to 7% had been witnessed. It is forecasted that for the F.Y. 2009-10 the growth will further fall to a minimum of 6%. But 6% is a harmless figure and is much higher that the crisis that India witnessed five years ago.

b.Following the decrease in the global consumption, it is forecasted that the growth in export rates will be miniscule and may even start showing a negative growth. This will mean that certain sectors like the steel / metals,...
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