GLOBAL FINANCIAL CRISIS & IMPACT ON INDIAN ECONOMY

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Information about GLOBAL FINANCIAL CRISIS & IMPACT ON INDIAN ECONOMY
Finance

Published on March 7, 2014

Author: kaustubhbarve

Source: slideshare.net

Description

The Global Financial Crisis of 2008 -
Its Causes, Impact on Indian Economy, RBI Measures and Lessons Learnt

 KAUSTUBH BARVE 11  MEET BHADRA 13  REWAT BHARSAKLE 15  ADITYA BHIMANAWAR 17

 INTRODUCTION  KEY EVENTS / CAUSES  IMPACT ON INDIAN ECONOMY  RBI MEASURES TO CONTAIN THE CRISIS  LESSONS LEARNT  CONCLUSION

   Also known as the US Meltdown - Worst Financial Crisis since the Great Depression of 1930s According to IMF officials, the losses due to the crisis amounted to $945 billion in USA alone, but may run into trillions of dollars when all the countries are considered together. The impact of this crisis was so severe that it led to the collapse of top investment firms like Lehman Brothers, Bears Sterns while others such as Citi Group, JP Morgan were rescued by the government and AIG

 Between January 2002 and mid-year 2006, housing prices increased by a whopping 87 percent. The boom had turned to a bust, By the third quarter of 2008, housing prices were approximately 25 percent below their 2006 peak. 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 

 It increased only slightly during the recessions of 1982, 1990, and 2001  The rate began increasing sharply during the second half of 2006  It reached 5.2 percent during the third quarter of 2008. 6% 5% 4% 3% 2% 1% 19 79 19 80 19 81 19 82 19 84 19 85 19 86 19 87 19 89 19 90 19 91 19 92 19 94 19 95 19 96 19 97 19 99 20 00 20 01 20 02 20 04 20 05 20 06 20 07 0%

 SPECULATION  CENTRAL BANK POLICIES  GOVERNMENT POLICIES

 Impacts on Indian trade:  10 billion C.A.D Foreign exchange reserves depleting to 53 billion.  Impact on India’s export:     • • • decline 15% in 08. imports grew by $6.1billion to $21.5 billion. Impact on jewelry,handloom and tourism 50,000 artisans lost their jobs. 4.6% drop in handloom exports. 8% to 10% dip in tourism.

 IT-BPO Sector: • 70% of companies started negotoating at lower rates. 60% cutting back on contracts. Only 40% increase thier offshore vendors.  Exchange rate depreciation : • • • • • 20% depreciation in rupee. Creating panick in impoters. Rupee breaching the line of 51 per $.

 Monetary  Fiscal Measures Stimulus packages of Dec ‘08 and Jan ‘09

 Strong rebound in investment demand  Domestic private demand remained dampened   Inflation started increasing due to high liquidity and money supply Monetary measures withdrawn; SLR, export credit refinance limit, etc., restored to pre-crisis levels.

 Sustained increase in food prices and manufactured goods  CRR raised to contain excess liquidity  Repo and reverse repo rates were increased  Risks from sluggish global economy, rebound in global commodity prices, volatile capital flows and high domestic food prices remain significant.

  Monitor Loan Performance carefully and make loans to high quality borrowers Governance structure of the risk management system needs to be improved --The Role of Risk Managers……..!

 Credit rating agencies themselves need to be re-examined  Global problems require global coordination  Transparency

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