Premium Essay

Global Financial Crisis 2007-2008 Impact on India

In: Other Topics

Submitted By rabinajit
Words 3932
Pages 16
:-Done by Sunil Kumar and Ajeet verma

Indian economy before us recession
India had been growing robustly at an annual average rate of 8.8 per cent for the past five years (2003-04 to 2007-08). This was higher than the potential growth rate of output as estimated by the IMF. The strong Indian growth story, based on its structural strengths of a young population, skilled manpower, rising savings and investment rates, large unfulfilled domestic demand and globally competitive firms attracted significant investor attention in recent years. Recent high rates of economic growth have been the result of high levels of investment, rise in productivity supported by technological up-gradation and greater integration with global flows of trade, finance and technology. The challenge is to sustain these high growth rates while also preventing an unacceptable rise in income and spatial inequities and also eliminating absolute poverty in a given time frame. The answer to this challenge is in raising India’s potential rate of output growth by removing the binding constraints. We have also estimated the potential growth rate for India during the last decade based on HP filter technique (Hodrick and Prescott, 1997) and found that in the last three years, India had been growing above its potential growth rate.
Figure 6: Potential GDP Growth and Output Gap (1997-08 to 2007-08)

Note: Based on HP filter technique as proposed by Hodrick and Prescott (1997).

Fears of over-heating of the economy prompted the Reserve Bank of India (RBI) to begin monetary tightening as early as September 2004 when the cash-reserve ratio(CRR) for commercial banks was raised. The sharp increase in global fuel and food prices in the first quarter of 2008 aggravated inflationary concerns and resulted in further monetary tightening that saw interest rates being hiked until
August…...

Similar Documents

Premium Essay

Impact of Global Financial Crisis on Pakistan

...Impact of Global financial crisis On Pakistan By: Nauman Ayubi Butt Roll # 8511 Table of contents 1) Reason of choosing this topic 2) Introduction 3) The term ‘Financial Crises’ 4) Financial Crisis 2007-2009 5) Causes of the crisis 6) The crisis getting global 7) The Financial crisis and Pakistan: 8) Sectoral impact of the crisis in Pakistan: 9) External sector impact i) Exports ii) Imports 10) Financial Sector impact on i) Foreign exchange ii) Banking sector iii) Circular debt iv) Stock market: 11) Inflation 12) Economic business sector impact i) Impact on textile industry 13) Social Sector Impacts 14) Poverty and unemployment: 15) IMF 16) Technique to tackle the situation Reason for choosing this topic: The reason for choosing this topic is that it has a direct relationship with the poverty, unemployment, literacy, wealth distribution and also with the increased level of terrorism in Pakistan. Introduction: Capitalism is an economic system in which land labor production pricing and distribution are all determined by the market. There is a strong history of capitalism that it can shift from extended period of rapid growth to very short periods of contraction The global financial crisis in 2008-09 which are still on the go, they actually started from the 20th century and they have been increasing since then. In the end of 20th century the U.S housing prices after a multiyear started declining, the mortgage prices had been......

Words: 5046 - Pages: 21

Premium Essay

Examine the Factors Leading to the Global Financial Crisis of 2008/10. Evaluate the Impacts of This Crisis on Either a) a Country of Your Choice or B) a Business of Your Choice.

...factors leading to the global financial crisis of 2008/10. Evaluate the impacts of this crisis on EITHER a) a country of your choice OR b) a business of your choice. In this assignment I will be discussing the factors that caused the global financial crisis of 2008/2010 and will be evaluating the impacts of the crisis on the UK economy. Firstly a recession is defined as a period of negative economic growth for two consecutive quarters. This means there is a fall in National Output and National Income. Inevitably a recession will involve higher unemployment and an increase in government borrowing. (Economic help, 2008, www.economicshelp.org, accessed on 24/11/2010) The financial crisis of late was caused by factors including, subprime lending, complex financial systems, greed, high oil prices, globalization and the collapse of the Lehman brothers. All of these factors will be explored throughout. Subprime mortgages are a big factor when talking about the recession, Justin Pritchard states that subprime refers to a borrower that is not prime. These are borrowers who might be less likely to repay a loan and therefore default. Subprime borrowers may be classified as subprime. Banks offered loans to people in the subprime category often putting more interest on the loans as they are a greater risk for the bank however the banks were happy to take on the risk as they could receive a greater interest rate back. These subprime mortgages were to have a big impact on the banks. As......

Words: 3557 - Pages: 15

Premium Essay

Impact of the Global Financial Crisis on Entrepreneurial Startups

...Table of contents Table of contents 2 Executive Summary 3 I: Key financial trends 4 Global Financial Crisis 4 European Sovereign Debt Crisis 6 Tighter financial regulation 8 II: Impact on entrepreneurial start-ups 9 Investment and valuation decisions 9 References 15 Appendix A: Effects of recession on entrepreneurial start-ups 17 Appendix B: New trend – business incubators 23 Appendix C: Valuation methodology 25 Executive Summary The Global Financial Crisis (GFC) is widely seen as the worst financial crisis since the great depression in the 1930’s. It negatively impacted global financial markets, led to the collapse of major financial institutions, the nationalisation of banks and caused a deep global recession. From its beginnings in the United States, networked financial institutions quickly led to international contagion and the European sovereign debt crisis. In response, the G20 officially endorsed Basel III – a new global standard to reduce systemic risk through stronger capital bases designed to act as a buffer during periods of financial instability and avoid bailouts. Sustained European government efforts to reduce debt through austerity have largely failed, and focus is now shifting to growth strategies. Entrepreneurial start-ups are a key route to driving long-term sustainable growth, but have been hit hard by sluggish consumer demand, tightening credit and scarce, expensive capital. This report discussed some of the implications for both...

Words: 5784 - Pages: 24

Premium Essay

2008 Financial Crisis

... 2008 FINANCIAL CRISIS Name Course Date 1. Background The financial crisis commenced in August 2007 after the preceding inflation. The crisis became more defined throughout 2007 and gained momentum in 2008. This took place even after the financial regulators and the central banks’ tireless attempts to tame the situation. It is alleged that the main factors that influenced its manifestation include corruption, fraud, speculation, greed, bankers and bankers’ bonuses. However, the academic discourse, politics or media has been unable to solve the mystery surrounding the main causes of the crisis[1]. The mystery is academically relevant to the world of research just like the Great Depression, whose causes are still being discussed. Other sources believe that the crisis might have been as a cause of human failures especially following the refusal to bail out the Investment Bank Lehman Brothers. The housing bubble was the immediate trigger of the 2008 financial crisis. The following were the triggers under the housing bubble. I. Subprime lending A subprime mortgage is the mortgage that is readily acceptable without imposing strict measures of standard on it. Before the 2008 financial crisis, there existed a fierce competition between mortgage lenders. The competition between the mortgage lenders ensued from the struggle for market share and revenue. It also took place in tandem with limited supply of creditworthy borrowers which put......

Words: 4957 - Pages: 20

Premium Essay

European Crisis and Its Impact on India

...Living beyond our means = European crisis In early 2010 economic activities of the PIGS (a group of 4 nations in Europe namely Portugal, Italy, Greece and Spain) have come under increased scrutiny from the international investment community, with the threat of “Sovereign default” lurking around the corner. Sovereign default refers to a situation when government of particular country is unable to repay its debts. This situation of default payments by governments lead to European crisis. With onslaught of the recession and subsequent introduction of various financial stimulus packages, the government expenditure like public job creation, pensions, social benefits etc ..on various countries took on gargantuan proportions to support these packages. To support these packages government was forced to borrow heavily consequently generating high fiscal deficicts.Most countries had manageable fiscal deficit, the government of PIGS nations mopped up a huge debt bill. The state of affairs in Greece which was epicenter of the sovereign default malaise is shamboic as country was known to live beyond its means. Debt Skelton of PIGS [pic] Role over risk in EURO ZONE It is one element played a role in the crisis is “roll-over risk”. Countries involved are exposed to a fiscal crisis (the “bad equilibrium”) to the extent that they are forced to rely on the market to roll-over their debt. Thus, much depends on the......

Words: 1939 - Pages: 8

Premium Essay

Global Economic Slowdown and Its Impact on the Financial Services Industry in India

...Global economic slowdown and its impact on the financial services industry in India April 2009 The global slowdown was an outcome of two events - absence of a sound regulatory framework & mismatch between financial innovation and the ability of the regulators to monitor them immediate aim should be to fix the financial system and to maintain the aggregate demand at a high enough level to stimulate the real sector 2 Contents Executive summary 1. Global financial markets: A perspective 2. Indian financial services industry 3. Impact of the recession on the financial sector of the Indian economy 4. Future outlook 5. Conclusion Contacts 4 6 9 14 18 20 23 3 Executive summary The global economy is reeling with the impact of the ongoing recession which started with the sub-prime crisis in the United States and found its way to other developed and emerging economies of the world. This recession has its roots in the initial collapse of the financial sector. However, in a world that is more integrated within each country as well as across nations, the events in the financial sector have eventually trickled down to the real sector of the economies as well. Finance and financial markets play a dominant role in growth and development of modern economies – hence, any recovery from the current recession must be couched in an overall recovery of the health and performance of the financial sector. In the absence of mature financial markets in their own economies,...

Words: 9865 - Pages: 40

Premium Essay

South Africa’s Macroeconomic Performance Before, During and After the Global Financial Crisis of 2007-2008

...The global financial crisis of 2007 – 2008 impacted every nation in the world, but the timing and severity of the impact varied greatly depending on various factors such as the sovereign debt as a percentage of Gross Domestic Product (GDP) prior to the financial crisis, as well as the level of exposure to the Collateralized Debt Obligation (CDO) sub-prime mortgagebacked securities of the different countries. Where governments and banks had significant exposure to CDOs, which became known as toxic debt instruments in the wake of the financial crisis, the impact was experienced more speedily and more severely. South Africa had very limited exposure to these debt instruments, so the impact on their economy lagged other economies such as the USA. a) South Africa’s macroeconomic performance before, during and after the global financial crisis of 2007-2008 As indicated by the figures in Table 1 below, production and the utilisation of production capacity began tapering down in 2008 as the financial crisis took hold. The figures for 2009 clearly describe the impact of the crisis on South Africa at the bottom of the cycle with reductions of 13.9% in production, 16.2% in sales, and 6.8% in the utilisation of production capacity from 2008. It should be noted that production, sales and utilisation of production capacity had by the end of 2012 still not recovered to the levels recorded for 2008. Table 1: South Africa’s production, sales and utilisation of......

Words: 1018 - Pages: 5

Premium Essay

Global Financial Crisis

...Positive and Negative Effects of the Global Financial Crisis Harlita H. Tomlinson Capella University BMGT8114: Accounting in the Global Era Dr. Wendy Achilles June 8,2014 Table of Contents Abstract 3 Positive and Negative Effects of the Global Financial Crisis 4 Background on the Global Financial Crisis 5 Global Financial Crisis and Its Negative Effects 9 Lack of Financial Sector Regulation and Oversights 9 Increase in the Number of Bankruptcies 11 Global Financial Crisis and Its Positive Effects 12 Designing Regulations to Monitor the Financial Sector 12 Global Governance as a Side Effect of the Global Financial Crisis 13 Lessons Learned 16 Domestic Lessons Learned 16 Global Lessons Learned 17 Lessons from Romania. 18 The Role of Financial Executives in GFC 19 Conclusions 21 References 24 Abstract The first financial crisis of the twenty-first century has not yet ended, according to Gorton and Metrick (2012), the wave of research on the crisis has already exceeded any single reader’s capacity, with the pace of new work only making this task harder. The Global Financial Crisis is considered by many economists to be the worst financial crisis since the Great Depression. Global Financial Crisis resulted in the threat of the total collapse of large financial institutions, the bailout of banks by national governments, and market downturns around the world. In the aftermath of this crisis, the housing market declined significantly and has......

Words: 6647 - Pages: 27

Premium Essay

The Global Financial Crisis: Impact on Bangladesh

...DRAFT COUNTRY CASE STUDY THE GLOBAL FINANCIAL CRISIS: IMPACT ON BANGLADESH K.A.S. Murshid BROTEE July 19, 2009 The author would like to gratefully acknowledge the contribution of Dr. Anwara Begum, Research Fellow, BIDS and Mr. Zabid Iqbal, Research Associate, BIDS. The author is a Research Director, BIDS. EXECUTIVE SUMMARY (TBC) I Introduction The world economy is currently experiencing the worst global financial crisis since the Great Depression. While major world economies have taken a massive hit resulting in negative growth rates in key countries or regions, including the US, EU and Japan, the contagion also spread to emerging developing countries like China, Brazil, India and South Africa, as well as to the countries of South East Asia and Latin America. The magnitude of impact seems to depend on the extent of integration with the rest of the world (or to use World Bank jargon, the extent of liberalization that has taken place). The impact on LDCs like Bangladesh has been muted in the first, and even the second round. However, there is growing evidence that third round impacts are making themselves felt, manifested in declining exports, declining migration of labour, growing number of sick industries, industrial unrest, and reduced growth. There are also fears that poverty and unemployment may be...

Words: 16127 - Pages: 65

Premium Essay

Impact of Global Financial Crisis on Air Transport

...Final Project Part One: Impact of Global Financial Crisis on Air Transport in the U.S Embry-Riddle Aeronautical University MBAA 522 – Business Research Methods For: Dr. Barry Bauer March 15, 2015 Introduction This research paper examines the origins of the 2008/2009 world financial crisis and the impact that the crisis had on air transport in the United States of America. Although the crisis originated in the economies of North America and Europe, its effects were global with particular serious implications for economies of the developing countries including my country, Zambia. The maximum blame of the crisis is pointed at the money lenders who created such problems as it is believed that it was the lenders in the developed nations who lent funds to people with poor credit and a high risk of default. Therefore, in an effort to address the crisis, the American Federal Reserve flooded the markets with increasing capital liquidity in order not only to lower interest rates but to also broadly depress risk premiums as investors sought riskier opportunities to bolster their investment returns (Craig, 2013). As we all know that aviation is one of the most important pillars of the global economy as it provides millions of jobs globally and contributes heavily in the global gross domestic products of a number of countries. To this effect, the aviation sector which is one of the fastest growing industries had to face negative growth rate while some aviation companies......

Words: 1965 - Pages: 8

Premium Essay

Financial Crisis 2008

...Banking Academy | City University of Seattle | CORPORATE FINANCE THE GLOBAL FINANCIAL CRISIS 2008 Group’s member:Nguyễn Như Nam (C)Phan Thu AnNguyễn Thùy DungHoàng Bá SơnNgô Thị Ánh TuyếtDate: 28/11/2014 | AbstractIn 2008 the world was fell into the worst financial crisis since the Great Depression of 1929-1933. Although this crisis has gone, however, its consequences for the economy of many countries is very serious, even now many nations are still struggling to escape difficulty. Just in a short period, the crisis originating from America has spread to all continents. It led to a series of serious consequences such as the falling in stock markets, increasing in unemployment rates, large financial institutions had been collapsed or bought out, and governments in many strong countries had to come up with rescue packages to bail out their financial systems. So why does it have tremendous destructive power? What are its causes and its development? What are the consequence it bring to the world? And what are the lessons drawn from this terrible event? Derived from these questions above, this paper will generalize about the global financial crisis 2008. | Table of Contents Abstract i 1. Background 1 2. Reasons 2 2.1 The housing bubble 2 2.2 Fed had lower interest rates for a long time. 2 2.3 The subprime boom 3 2.4 Securitization (MBS, CDO) and Credit default swaps (CDSs) 3 2.5 The credit rating companies. 5 2.6 Structured investment......

Words: 5972 - Pages: 24

Free Essay

The 2008 Financial Crisis

... | |The 2008 Financial Crisis | |A Review and Critique | | | |Nicholas Makris | |12/4/2012 | | | Introduction The 2009 economic crisis was significant for two reasons: the rapid rate at which the free market constraints were dropped, and the lack of any stable resolution by the Left (Mellor, 2009). Tenets pertaining to market domination suffered a lethal crack owing to multiple nations realizing the inessential communization, rather than the actual, of economic arrangement (Mellor, 2009). The core of the problem was complicated, but simplification showed it was the nonstandard arrangement of the monetary system that created a complicated scope of financial tools and entities to...

Words: 7080 - Pages: 29

Premium Essay

Impact of the Global Economic and Financial Crisis over the Automotive Industry in Developing Countries

...R e se a rc h a n d Stat i s t i c s B r a n c h working paper 16/2009 Impact of the Global Economic and Financial Crisis over the Automotive Industry in Developing Countries UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION RESEARCH AND STATISTICS BRANCH WORKING PAPER 16/2009 Impact of the Global Economic and Financial Crisis over the Automotive Industry in Developing Countries Peter Wad Copenhagen Business School UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Vienna, 2010 This paper was prepared by Peter Wad, UNIDO consultant and backstopped by Nobuya Haraguchi, UNIDO staff member, Research and Statistics Branch, Programme Coordination and Field Operations Division. Iguaraya Saavedra provided administrative support. The designations employed, descriptions and classifications of countries, and the presentation of the material in this report do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations Industrial Development Organization (UNIDO) concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries, or its economic system or degree of development. The views expressed in this paper do not necessarily reflect the views of the Secretariat of the UNIDO. The responsibility for opinions expressed rests solely with the authors, and publication does not constitute an endorsement by UNIDO. Although great care has...

Words: 19863 - Pages: 80

Premium Essay

Financial Crisis 2008

...Financial crisis 2008. What is it? The Great Recession was a period of general economic decline observed in world markets beginning around the end of the first decade of the 21st century. The exact scale and timing of the recession, and whether it has ended, is debated and varied from country to country. In terms of overall impact, the International Monetary Fund concluded that it was the worst global recession since World War II. According to the US National Bureau of Economic Research (the official arbiter of US recessions) the US recession began in December 2007 and ended in June 2009, and thus extended over 19 months. The Great Recession was related to the financial crisis of 2007–08 and U.S. subprime mortgage crisis of 2007–09. Why it happened? Exist four main reasons for financial crisis 2008: 1) Sub-prime mortgages 2) Collateralized debt obligations 3) Frozen credit markets 4) Credit default swamp What led to this? Once upon a time, investors in the United States bought Government bonds, which were very reliable investment, but after unrest in the Government rate reduced to 1% that did not like investors and they refused. But banks were just glad now they could borrow nearly free loans and earn money using financial leverage, and then return the borrowed money. Soon this game banks hooked investment banks by selling them mortgage loans for real estate. Because real estate is always grew up in price, and fast, then won it all. Further, the Bank takes many......

Words: 445 - Pages: 2

Premium Essay

Impact of Global Financial Crisis on Novotel

...areas; research questions, literature review, conceptual framework, methodology used and justification, research methods and ethical considerations. Having an understanding of the food and beverage sector within Novotel Hotels in the Sydney Metropolitan area and the challenges it faces is important, in this selected case study it not only is effected by the Hospitality industry but also the tourism industry as well. Both these industries have felt hard and negative impacts from the global financial crisis and have definitely had an impact on our case study. This business research report identifies the need to evaluate the relationship between a decline in international tourist, the change in food and dining trends and the revenue of Novotel in the Metropolitan area. The research follows the deductive research method. For the purpose of this report the hypothesis is Novotel food and beverage sector in Sydney metropolitan areas is making a loss and losing customers because of the global financial crisis. The research was conducted through a mixture of qualitative and quantitative research methods including; the report samples the primary research methods such as sample questionnaires, observational research and interviews. The secondary research methods mainly included personal communication and researching the hospitality databases, tourism and Australian Bureau of Statistics Website. Table of Contents Executive Summary 1. Research......

Words: 2949 - Pages: 12