The global economic recession played havoc in India also. The worst affected was the capital market. The SENSEX and NIFTY , the two major stock indices in India fell by more than half from its position at the beginning of last year. However, Indian banking system was saved from the attack of global recession thanks to the timely intervention by Reserve Bank of India. Many times the liquidity in the banking system was under pressure resulting into withholding of credit expansion. But the timely intervention by Reserve Bank of India by pumping additional liquidity into the system enabled the banks to survive the liquidity crunch. In order to ease the liquidity crisis, RBI released funds by reducing reserve ratios (SLR &CRR) and Repo rates. These steps helped the banks to continue their lending activities which were a great boon to the corporate entities in India when their counterparts elsewhere in the world were crying for more funds. Within a short gap of 3 months our stock indices picked up and started upward journey. The worst affected sector in India is the IT which had to downsize their employees to meet the decline in business. Though construction industry received a temporary setback, it is now slowly picking up. However, exports have declined due to the slump in demand abroad. Consequently, the rupee declined substantially making the imports costly. The inflation in India is all-time low and at one time people were wondering whether we would be moving to deflation. Given the present condition, India can grow by 6 to 6.5%. A good monsoon can bring better crops and if this happens, India can hope for a better growth. The Indian economy is poised to rebound and reach its full glory by mid-2010. FIIs have already become active in the capital market. One biggest problem we may have face is the return of expatriates on account of job-loss abroad and giving them a position in India. Let us hope that the industrial and business expansion during the coming days can absorb them also. The Indian experiences are excellent lessons for countries across the world.
Wednesday, April 29, 2009
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