US Financial Crisis: India Stably Stumbles



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Code : ECC0031

Year :
2009

Industry : General Business

Region : India

Teaching Note: Available

Structured Assignment : Available

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Abstract: This case enables a discussion on how US Financial Crisis (2008), has impacted the Indian economy and what should be the remedial measures. India, in its efforts to be globally integrated, encouraged cross border transactions by easing up the regulations. With US financial crisis (2008) having cascading effects on various economies across the world, India also has a share of its economic cake eaten away by the financial crisis monster. However, while some sectors felt pronounced effects, other sectors were affected relatively less. This case highlights all those sectors that are affected by the US financial crisis, directly and indirectly.

Due to stringent regulations, it has not, so far, been into a serious disruption. However, India is witnessing some slowdown. India's export revenues have declined for the first time in the past 5 years. The real estate markets in India have slowed and home prices started falling sharply. As the foreign investors pulled out money, stock market index fell. As there is a panic among investors, there is no room for fresh investments, which started affecting other industries. Moreover, Indian banks started tightening their credits/loans for the industry sector. Government of India along with Reserve Bank of India is taking conventional as well as non-conventional measures to increase liquidity in the financial system. India believes that these measures will reduce panic among investors and help avoid major recession or depression. The intriguing question here is Are these measures or policies enough for the current scenario?


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Pedagogical Objectives:

  • To understand the background and US financial crisis (2008) and its impact on world economies, including emerging economies like India
  • To understand the nature and intensity of US financial crisis (2008) on Indian economy and debate on the likely damage it can cause to various sectors, especially those sectors that are globally integrated
  • To debate on the efficacy of steps taken by Government of India and its various regulatory authorities (RBI, SEBI, etc.) and explore further steps to be taken to keep economic growth momentum on.

    Keywords :US Financial Crisis , BRIC, INDIA, Subprime Mortgage, Financial Services, Stock Exchanges, Derivatives, Foreign Institutional Investors (FII), Foreign Direct Investment (FDI), GDP, Exports, Interest Rate, Banks, Forex

    Contents :
    US Financial Crisis
    Northern Rock's Business Model
    US Liquidity Crunch and Rising LIBOR
    Central Bank Intervention and Crisis at Northern Rock


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