—Today, India is much more integrated with the
world economy through both the current and capital accounts.
The down turn that appears to have begun in the USA in
September, 2008 have some negative impact on Indian economy.
The most immediate effect of this global financial crisis on India
is an out flow of foreign institutional investment (FII) from the
equity market. This withdrawal by the FIIs led to a steep
depreciation of the rupee. The banking and non-banking
financial institutions have been suffering losses. The recession
generated the financial crisis in USA and other developed
economies have adversely affected India’s exports of software
and IT services. For fighting this crisis, government of India
responded through its monetary policy by pumping the
liquidity into the system rather than using effective fiscal policy
i.e. public expenditure and investment to face the recession. No
doubt, government has introduced three fiscal stimulus
packages for stimulating demand in the economy but it was not
sufficient, the larger government expenditure should be
oriented towards agriculture and infrastructure. Although
India has revived to high growth, this new growth should have
to come not from some new speculative bubble but from
enlarged government expenditure that directly improves the
livelihood of the people. The present paper is an attempt to
analyze the impact of recent global financial crisis on Indian
economy. The paper is divided into three sections. In the first
introductory section, we have discussed the features of recent
global financial meltdown. The section two deals with the
impact of this crisis on Indian economy and discusses how India
came back to high growth. Conclusion and suggestions have
been given in the third section.
—Depreciation, foreign institutional investment
(FII), global financial meltdown, India, recession.
Rajiv Kumar Bhatt is with the Department of Economics, Banaras Hindu
UniversityVaranasi-221005, India(e-mail: email@example.com).
Cite:Rajiv Kumar Bhatt, "Recent Global Recession and Indian Economy: An Analysis," International Journal of Trade, Economics and Finance vol.2, no.3, pp. 212-217, 2011.