GLOBAL ECONOMIC CRISIS

&IMPACT ON INDIA

Background

Of

Subprime crisis •Greed of Investment bankers

•Failure of Regulating authorities

•Fallacious rating by rating agencies

Reasons

For

the crisis•Boom in the housing market

•Speculation

•High risk mortgage loans

•Securitization practices

•Inaccurate credit rating

Information technology

• US banks had huge running relation with Indian software sector

• About 30000 jobs were impacted

• Revenues from the IT field declined

Exchange rate

• Exchange rate volatility in India increased

• Rupee depreciated sharply

• Rupee fell by nearly 25%

Foreign exchange outflow

• Indian economy greatly integrated with the global market

• Outflow of cash reserve

Investment

• Decline in the investment flow

• Doubts in the investment of mega project

Real estate

• Sudden slump in demand

• Curtail of expansion plans

Stock markets

• Steep fall in value of stocks

• Sensex plunged below 10000 marks

• FII pulled out $11 billion from India

Exports

• Crisis contracted demand for exports

• Crisis affected Indian economy as it is export oriented

• Rise in unemployment

Unemployment

• Increase in unemployment

• Layoffs and wage cuts took place in companies

• Millions of jobs were lost n the whole world

Euro crisis

Major impacts

On

Indian economy

•Impact on FDI

•Software sector

•Inflation

•Exchange rate depreciation

Impact on FDI

• No significant impact on FDI

• Out flow of FII

• Share of FDI by Euro zone is less

Software Sector

• Net earnings from software sectorDeclined by 7.4%

India's exports

• Positive relation between India's exports and world GDP.

• Elasticity of India's exports with world GDP is 0.29

• Slow down in world economy

Inflation

• Inflationary rate rose sharply

• Central bank revised bank rates 5 times

• Domestic inflation stood at 9.7% in Oct 2010

By, S

Presented By, Adarsh Simmy Manuel