Impact of global financial crisis/slowdown
Introduction:
The impact of global financial crisis is “stronger and longer than expected” and there is a need to weather its negative impact on the domestic economy, according to Dr D. Subba Rao, Governor of Reserve Bank of India.
“India is experiencing the knock-on effects of the global crisis, through the monetary, financial and real channels,” even so the Indian banking system is not directly exposed to the sub-prime mortgage assets, Dr Rao said in his inaugural address at the seminar. “Our financial markets have come under pressure mainly because of what we have begun to call ‘the substitution effect’.
The industrial slowdown is now accepted as fact by most policymakers and observers of the Indian economy. Yet officials and commentators seem to blame it on external factors: most obviously, the global financial crisis originating in the US economy, the consequent economic slowdown and now recession in the US, the European Union and other developed country markets, and the associated impact upon exports.
Causes for concern
There is evidence of economic activity slowing down. At the same time, headline inflation, as measured by the wholesale price index, has fallen sharply, and the decline has been sustained for the past three weeks, pointing to a faster than expected reduction in inflation."
"Clearly, falling commodity prices have been the key drivers behind the disinflation; however, some contribution has also come from slowing domestic demand.” But it is also unfortunately the case that our own economy has been showing several causes for concern even before that external bad news started pouring in. There was the accelerating inflation, which particularly hit food and other items of essential consu ...