Effects of the global financial crisis on India

A financial crisis occurs whenever changes are encountered including a sudden drop of the exchange rate due to new financial market conditions. The latest financial crisis in the United States has influenced markets across the world, including India, which saw the growth of its Gross Domestic Product (GDP) declining.

Text by Ramesh Ramamurthy

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Effects of the global financial crisis on India

The sudden shift in the global economy initiated by the collapse of top financial giants in the US, has send shock waves through global financial markets. Since a high amount of businesses in many sectors are tied up with the global economy, the effects of the crisis left a deep footprint on India. The areas most affected in the Indian economy included financial markets, trade flows and exchange rates. A major part of credit markets seems to show decrements as the crisis unfolds.

In India, especially in the equity markets, there have been some adverse effects due to the financial crisis changes. These changes were experienced by the domestic industry as well as other sectors. Change in capital flows towards the Indian economy have been experienced and have affected the Indian exchange rate. India’s GDP growth estimates for the current fiscal (2008-09) have been downgraded from 8% to 7.4 ...