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Impacts of financial crisis on India
- 2. GLOBAL FINANCIAL CRISIS :- a worldwide financial fia$co, is an economic recession or depression caused by lack of necessary liquidity in financial institutions.
- 5. Low rate of interest Property bubble Deterioration of financial standards and bad regulation Financial innovation and lack of transparency Burst of property bubble Problem in fulfilling subprime mortgage obligations Loss of financial and investors Reassessing risks and risk taking Increase in counter party risk , losses Financing possibilities have narrowed Cost of financing has increased Impact on financial markets and economy Tightening credit condition Excessive financing Spreading risk
- 6. *** The Global Financial Crisis has not left the “ INDIA” unscathed………***
- 7. GLOBAL LIQUIDITY CRUNCH AND THE INDIAN ECONOMY Large selling by foreign institutional investors(FII) Subsequent interventions by RBI in foreign currency market ,continuing growth in advances Earlier increases in cash reserve ratio(CRR )to contain inflation
- 8. Impact on Export of India Indian shipment decline 33.3% ( biggest decline since last 14 years)
- 9. EXPORTShipments of Indian natural pearls, precious and semi precious stones & pharmaceutical product dropped by 22.63% trade between USA and India decline by 23.47% (in 1st Q of 2009) Indian gems and jewellery sector also decline Textiles and clothing export dropped by 14.09% in 20008-09 FY Declination in Indian export to USA (in 1st Q of 2009)
- 10. Impact on Stock market Foreign investors have pulled out from stock markets leading to losses in stock and mutual funds. Because of such uncertainty Many people started saving money in banks rather than investment More people sold the shares in the Indian market than they bought during this period . This resulted the fall of sensex to lower points.
- 11. Table : Sensex & Foreign Investments Year Total Foreign Investment BSE Sensex (Base : 1978-79 =100) 1999-00 22450 4658.63 2000-01 31015 4269.69 2001-02 38874 3331.95 2002-03 29105 3206.29 2003-04 72139 4492.19 2004-05 69042 5740.99 2005-06 94981 8278.55 2006-07 135080 12277.33 2007-08 249921 16568.89 2008-09 110123 12365.55 2009-10 332575 15585.21 2010-11 281897 18605.18 0 50000 100000 150000 200000 250000 300000 350000 400000 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Graph:- Sensex and total foreign investment relation BSE Sensex (Base : 1978-79 =100) Total Foreign Investment
- 12. 2009 2008 2007 Lowering of Growth rate of indian economy 9% 8.4% Year GDP- Growth rate (%) 1999 5.5 2000 6 2001 4.4 2002 4.3 2003 8.3 2004 6.2 2005 8.4 2006 9.2 2007 9 2008 8.4 2009 7.4 2010 10.4
- 14. 1. 2. 3. 4. The factors responsible for slow down of India’s IT export growth
- 15. year Unemployment % 2002 8.8 2003 8.8 2004 9.5 2005 9.2 2006 8.9 2007 7.8 2008 7.2 More than 500,000 jobs were lost during the last 3 months of 2008 in export oriented sector including gems and jewellery many workers lost jobs in diamond jewellery , textiles and leather industry the crisis had affected the RS 3000 crores handloom industry and volume of handloom exports dropped by 4.6% in 2007-08 creating widespread unemployment in this sector companies in IT industry have stopped hiring and projected lower manpower need Job lost
- 16. The impact of global financial crisis on some important macroeconomic variables Decline in the stock market indices Fall in the external values of rupee, especially vis-a-vis the dollar Decline in the foreign exchange reserves held by the reserve bank of India
- 20. POSITIVE IMPACTS ON INDIAN ECONOMY Expose of weaknesses in the economy Cost stabilization in real estate market Rationalization of salary structure in IT Industry Performance appraisal is gaining ground Austerity is targeted path Best place for outforcing Opportunities for international trade