Global Financial Crises 2007-09: Implications for Indian Economy

Abstract

In the light of effects of US financial crisis of 2008 permeating global economies, the paper attempts to assess that effect on Indian economy. The investigation of impact of crisis entails the secondary data on India's macroeconomic and financial indicators. A comprehensive account of impact of crisis on economy was sketched which also encompassed the regulatory action taken by the government in response to the evolving crisis of 2008. The paper concludes that the channels of trade, financial and currency served in propagating the penetration of US financial crisis into the Indian economy. Three sizable arms of economy viz., industry, agricultural and the service sector suffered a severe blow from the crises' effects. The chief reason of the contagion succeeding in penetrating decoupled economies of emerging markets like India was global integration. All significant arms of the economy, such as capital flows, international trade, foreign exchange reserves, industrial production, agricultural production, employment, economic growth, etc. experienced a substantial decline in their growth rate. However, the accommodative and expansionary fiscal and monetary policy, timely facilitated, assisted the economy in circumventing the severe effects of crisis. As a result of prompt response of the regulators and government, Indian economy was back on its growth traction by the second half of 2009.