Impact Of Global Economic Crisis On Indian Economy – 1 STUDY OF THE GLOBAL ECONOMIC CRISIS IN THE INDIAN CONTEXT: ANALYSIS Suraj Walia Research Scholar, Department of Economics, Kurukshetra University, Kurukshetra (Haryana). Abstract – Economic problems and spillovers are increasing with increasing globalization. Its origin may be different but its vibrations are felt in different parts of the world, including India. This article attempts to analyze the impact of the global economy on the Indian economy, which is one of the fastest growing economies in the world. The Indian economy is currently facing a crisis due to the current crisis in the country. As a result, economic activity will decrease. The global economic crisis or US Meltdown, started in the US housing sector recently, but gradually increased over time and brought the world under its control. Although Indian officials initially denied the impact of the economic crisis on the Indian economy, the government had to admit that the crisis would have an impact on India’s economy. This article highlights that various sectors of the Indian economy have been affected by the global recession, to some extent. Keywords: global economic crisis, recession, Indian economy, macroeconomic indicators. I. INTRODUCTION Economic problems and their spread are increasing with increasing globalization. The origin of the earthquake may be different, but the tremors were felt in different parts of the world. The new economic policy of 1991, based on Liberalisation, Privatization and Globalization (LPG), increased the level of economic development in India. During the Indian economic revolution, the Indian economy grew by 8 to 9 percent. As a result, all macroeconomic indicators such as savings, imports and exports, foreign exchange and employment rates increased significantly. The wave of global economic crisis has also created problems for India, but we do not see the economic situation in India. Although this is true in one way or another, but until the Indian economy went through a major economic crisis, and it completely slowed down our development. The economic crisis began in the United States (USA) because it is said that the global economy is entering a period of prolonged recession in economic activity. The severity of the current economic crisis is so great that it can be compared to the Great Depression of 1873, the Great Depression of the 1930s, and the East Asian crisis of the 1990s. The current recession is considered the worst subprime mortgage crisis in the US financial sector. As a result, the first mortgage crisis led to the collapse of the US housing sector. In keeping with the basics, this paper is structured as follows. The global economic crisis is explained in the second part. The impact of the global economic crisis on the Indian economy is presented in the third section. And finally, Section IV concludes the paper with policy implications. II. CONTINUOUS ECONOMIC CRISIS Recessions or crises are part of the normal business cycle. A crisis can be a frightening or tragic change in a major political, social, economic, military, or environmental event. The recent economic crisis is seen by many as a clear example of the unbridled pursuit of greed at the expense of prudence, prudence, diligence and the law. From the beginning of the economic crisis until mid-2007, when three things became clear – low-income Americans or families who borrowed heavily from banks and mortgage companies, the size of this loan market is huge. $1.4 trillion and financial engineers on Wall Street classified these loans as hard financial instruments. From 2001 to 2006 the US economy was good and interest rates were low in various sectors, housing prices increased due to reduced demand and Vol. 1 Edition 2 July ISSN : X
The banking sector 2 is slightly profitable. Therefore, banks and financial institutions in the United States have created a new strategy for loans, where high interest rates are provided and loans are given to low-income borrowers to buy houses. They are fully aware of the risks involved in borrowing but take those risks with the belief that house prices will never go down. Investing in the real estate sector has proven to be profitable for speculators and banks, as real estate prices continue to rise. Americans have made huge investments in the real estate sector. This has led to increased demand for housing and mortgages in the United States. To meet the high demand for loans, the income of banks and financial institutions is found to be insufficient. Therefore, American banks and financial institutions introduced a new lending instrument called Mortgage Bonds. The basis of these mortgage bonds are foreclosed homes from people who took out mortgages on foreclosed homes by illegally inflating the value of the home above its true value. These mortgage bonds are traded in international markets. US banks made a lot of money selling mortgage bonds. These funds are used to finance the loan in the United States. This housing bubble based on subprime mortgages burst within a year and home prices fell after many years. This has an impact on investment estimates in the real estate sector. Those who use real estate to make more profit, have to face losses. They started selling the house but due to lack of demand, the house could not be sold. A large mortgage is not paid by the borrower. Banks and financial institutions failed to recover these loans. Borrowing rates began to fall sharply, causing losses for those who invested in mortgage bonds. However, the problem of lack of money in America has become very serious. The accident happened in the third quarter of this year. Major banks like Lehman Brothers, Merrill Synch declared bankruptcy. In America, 19 major banks and 100 private financial institutions were declared bankrupt. However, the lack of credit for mortgages is the root cause of the global financial crisis. I, I, I. The Impact of the Global Economic Crisis on the Indian Economy The Indian economy has performed well over the past two decades, resulting in an increase in GDP (GDP), in addition to increasing domestic savings and increasing investment and productivity. Although the focus of the financial crisis was the subprime mortgage market in the United States, the resulting stress was also felt in financial markets around the world. Although the Indian authorities initially denied the impact of the global economic crisis on India’s economy, later the government had to admit that the impact on India’s economy would global crisis. The American collapse that rocked the country had little impact on India, due to India’s strong economy, regulated banking system, and limited exposure of the Indian financial sector to global financial markets. . Perhaps this saved the Indian economy from recession. Unlike America which clings to capitalism, in India, the market is strictly controlled by the government. The credit crunch in the US did not cause a financial crisis in the Indian economy, but the credit crunch in the US caused a financial crisis in India. After a long period of rapid economic growth in India, slow industrial growth, double inflation, widening current account deficit, etc. The global crisis has affected the health of many sectors of the Indian economy through various channels: stock market, trade, export & import, and exchange rate. The following table shows the impact of the country’s economy on the growth of the gross domestic product (GDP) of different sectors of the Indian economy. To assess the impact of the global recession on India’s economy, a comparative analysis of GDP growth rates during recession and recession years has been conducted. Vol. 1 Edition 2 July ISSN : X
Impact Of Global Economic Crisis On Indian Economy
3 EXERCISE 1: DEVELOPMENT PERFORMANCE (SECTOR) IN INDIA Pre-Crisis Years Crisis Years Agriculture, Forestry and Fisheries Mining and Mineral Resources Manufacturing Electricity, gas & water supply trade, hotels & restaurants Construction Transport, Storage & Communication N.A. 8. Finance, Insurance, Real Estate and Business Services 9. Community, Private and Social Services Total GDP in all sectors The above table shows that in all sectors of the Indian economy, mining, manufacturing and trade were affected by the crash. of the Indian economy. He is. This happened due to the decline in demand for Indian steel and the decline in exports, especially garments. Although the Indian economy maintained a growth rate of 9.2 percent in the year This is the second highest growth rate in the world after China. This is in contrast to the true economic decline that is happening in many Western countries. But the Indian economy could not withstand the global impact