Mandeep Kumar, A, Q-41: Financial Crisis: How India got away lightly?

FINANCIAL CRISIS: HOW INDIA GOT AWAY LIGHTLY?

Introduction: Financial Crisis term is used at those situations when suddenly financial institutions or assets lose a large part of their values. In the past centuries many financial crises occurred mainly in banking sectors, stock market and due to the currency crisis etc. which lead to decreasing the value of assets in terms of money.

Types of Financial Crisis:

Banking crisis: It is a situation when in a bank sudden rush of withdraws occurs it is termed as Bank Run. The situation may lead the bank to bankruptcy. When the bank run situation reaches at a very high level then it is called Banking Panic. After this situation banks are having low funds available in the deposits. So they hesitate in lending money to the customers due to the insufficient funds available, this is called Credit Crunch, and the banks are directed to financial crisis.

Stock Market Crash: It is the sudden fall of price of shares across the major part of the stock market. It leads to the loss of paper wealth It directly affect the economic factors.

Currency Crisis: A situation in which the value of currency becomes unstable making it difficult for the currency be used as a reliable medium of exchange. The effects of currency crisis can be covered by sufficient by foreign reserves.

HOW INDIA FACED THIS CRISIS:

Discussion: India dealt effectively with the recent crisis. In spite of global recession India remained the second global economy in world. India’s GDP grew by more than 6% through this recession period and by 7.9% in the last quarter of 2009.

Mumbai, which is India’s financial nerve center and commercial capital, was attacked by terrorists in late Nov.2008. So after that foreign investors withdrew $12 Billion from India Stock Market, but India’s encouragement in this misfortunate happening and its mature restraint in this violent provoking situation encouraged investors to return and after that Foreign Direct Investment totaled $27.3 Billion in 2008-2009 and in spite of crisis reached $1 billion in just one week in May 2009.

The major part in India is much less dependent than most countries on global flow of trade and capital. India is dependent upon its strong internal market. India kept on producing goods and services for the other Indians and kept its economy strong and robust.

Also Indians abroad sent remittance from overseas to their own country remained strong. Also Indian banks and financial institutions were not tempted to buy mortgage-supported securities. In the last 15 years it has pulled many people out of poverty than previous 45 years, also per capita income of India has grown up at a faster rate than ever before.

CONCLUSION:

Most of the foreign companies invested in India even at the time of financial crisis too, so no doubt India is one of the fastest growing, independent economies.

Also agriculture and production played a vast role to strike out crisis because govt. allowed private sector to explore their potentials. The major thing was the encouragement of Indians even in those misfortunate happenings like Financial Crisis and attacks on Mumbai together. Although even after liberalization still many problems are here in India like corruption, poverty, illiteracy, poor infrastructure. But still India got away lightly from this situation of crisis. So let us think of the position of India in world economy when we will cover up these problems. Really India will become a world power.

And in the end now Lokpal bill has been passed, this will really help India to deal with the major problem of corruption and it will bring a bright future of Indian economy along with it. So let us start from today contributing individually for covering up these major problems to make India World Power. Cheers to Lokpal Bill..!!!

Reference: Internet/Wikipedia.org