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Global Crisis

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How this country was affected by the current global crisis? How is it dealing with the situation? Be sure to address the monetary and fiscal policy of the government and the rescue package (if any) implemented by the government.

This paper describes how government of India and RBI (Reserve bank of India, equivalent to Fed Reserve in US) tackled aftermath of global financial crisis in India.

Effects of Global crisis

Aftermath of Financial crisis was more prominent during 2008. As the global financial crisis began unfolding in the first nine months of 2008, foreign institutional investors pulled out close to $10 billion from India, dragging the capital market down with it. The liquidity crisis, coupled with the credit squeeze and a weak currency, hurt various sectors. Banks have reined in retail financing, affecting home and auto loans. Car loans account for 70% of consumer auto purchases now, down from 85% a year ago. Meanwhile, consumers are deferring other purchases while financiers have been logging a drop in loan disbursal rates At that time the Bombay Stock Exchange Index, or Sensex, tumbled 6% to a two-year low. For the first time in five years, the central bank cut the cash reserve ratio, the amount of funds that banks have to keep with the Reserve Bank of India by 50 basis points, to 8.5%, on Oct. 6, 2008. The same evening, the Securities & Exchange Commission of India eased some restrictions on foreign portfolio investors—such as registering in India before buying shares and limits on offshore derivatives—it had imposed in 2007. The stock market remained choppy, there's been a credit squeeze, interest rates were up, and banks continue to rein in loans as inflation hovers at 12%. Growth has slowed from the heady 9% of a year ago to 7.9% for the three months ended in June, and it's forecast to grow only at 7.5% for the fiscal year ending next…...

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